The ups and downs of procurement reform: the POGO schtick

The Coalition for Government Procurement  ("POGO")

has long supported common-sense solutions to streamline

 federal procurement processes, modernize procurement policies, and 

utilize commercial practices to the maximum extent practicable. 

Policies and programs that effectively and efficiently 

leverage the commercial marketplace are essential for the delivery of

 best value commercial products, services and solutions 

for federal customers and the American people.

Procurement reform is in the eye of the stakeholder

These days, it appears that increasingly the dialogue regarding the condition of the federal acquisition systems has soured, as a seemingly ever-growing inventory of the deficiencies and shortcomings has overtaken the conversation. Indeed, more and more we are told that the procurement process is in crisis, that it is unable to sustain access to innovative technologies, and that it is an obsolete relic of a bygone era.

The inherent reaction to this narrative is the call for the implementation of new reforms — i.e. policies, statutes, and regulations — to completely overhaul the procurement process. Before embracing this conclusion, however, we should reflect upon both the historical context of the procurement process and the lessons we have learned over time. In particular, it is important to understand how Congress, with the enactment of the Federal Acquisition Streamlining Act (FASA) in 1994, has already reformed the procurement system.

As recognized by the recently published first volume of the report of the Section 809 Advisory Panel on Streamlining and Codifying Acquisition (Section 809 Panel),  FASA 

established a definition for the term commercial item, a preference for procuring commercial items, an emphasis on commercial market research, greater reliance of commercial sector business processes, a requirement to use standard commercial terms and conditions to the maximum extent practicable, waiver of many statutes that would otherwise have been applicable to commercial items, and a framework for maintaining a limit on the number of future statutes that may be applied to procurements of commercial items.

However, since FASA was implemented, the number of DoD-related commercial buying provisions and clauses has increased by 188 percent, and the number of commercial clauses that may be flowed down has increased five-fold. In 1995, the FAR and DFARS contained a combined total of 57 government clauses applicable to commercial items. Today there are 165 clauses, with 122 originating in statute, 20 originating in executive orders, and 23 originating in agency-level policies.

In addition, we should consider the testimony on major weapons system acquisition provided in 2013 by Paul Francis of the Government Accountability Office before the House Armed Services Committee.

We should build on existing reforms — not necessarily by revisiting the process itself but by augmenting it by tackling incentives. To do this, we need to look differently at the familiar outcomes of weapon systems acquisition—such as cost growth, schedule delays, large support burdens, and reduced buying power.

Some of these undesirable outcomes … occur not because they are inadvertent but because they are encouraged by the incentive structure.

I do not think it is sufficient to define the problem as an objective process that is broken. Rather, it is more accurate to view the problem as a sophisticated process whose consistent results are indicative of its being in equilibrium.

The rules and policies are clear about what to do, but other incentives force compromises. The persistence of undesirable outcomes such as cost growth and schedule delays suggests that these are consequences that participants in the process have been willing to accept.

Before strapping dynamite to the procurement system, we would do well to reflect on the incentives inherent to the system, how they can be rebalanced in light of current policy imperatives, and adjust our buying practices, including our rules, accordingly. To do otherwise, risks perpetuating the cycle of reform and re-regulation that we have seen over the decades.

Alternatives to competitive bidding, designed to save time or money, reduced accountability

New Mexico, USA

Audit: State contracts lack competition

New Mexico state procurement rules designed to ensure competition on contracts for goods and services are being circumvented unnecessarily amid exemptions that cover $6.5 billion in spending each year, the State Auditor’s Office said Tuesday. A special audit by the office of State Auditor Tim Keller found some state agencies used emergency exemptions in ways not permitted by law and that sole source contracting remains common.... New Mexico spends between $10 billion $13 billion in state funds and federal aid each year on procuring goods and services.

Health care contracts signed by the Human Services Department accounted for the bulk of exemptions to the state procurement code — more than $5 million in the fiscal year ending in June 2016.

State Auditor Tim Keller said current alternatives to competitive bidding were designed to save the state time or money, but have ended up reducing accountability in government and fairness to outside businesses. The audit also found limited oversight of political campaign contributions from contractors hired by the state.

The report recommends reforms to rein in exemptions to competitive bidding and to streamline contract approvals under a single procurement oversight authority. Agencies typically spend over six months to approve a contract, making it more likely that agencies will look for short-cuts, the audit stated.

In a letter to Keller, Department of Finance and Administration Secretary Duffy Rodriguez called the methodology behind the audit “questionable” and described as conjecture concerns about the general overuse of non-competitive procurement. Keller said, “We’re supposed to protect against pay-to-play and fraud, waste and abuse, and also I think just be accountable for where those dollars are going. What our audit showed is that, by and large, for billions of dollars, we are not doing that in one way or another. We’re either violating our own laws or we’re not tracking the data.”

Auditor’s report reveals state overreliance on no-bid contracts

The study, to be formally released Tuesday, found state agencies, in violation of the government procurement law, used emergency exemptions from purchasing rules when there was no urgency to bypass the competitive bidding process.

The Auditor’s Office reviewed 11 small contracts, too. Less oversight is required for purchases of less than $60,000 in many cases, but the report found a state agency amending small contracts several times to include much larger sums.

The report examined 13 larger sole-source contracts and found 10 did not meet the state’s rules for such purchases. The State Auditor’s Office said agencies are skipping the competitive bidding process out of convenience and based on assumptions about price. The report also examined 14 emergency purchases and found only three fit the definition of an emergency; an agency said it needed to fix what the report described as a contamination issue even though the agency had learned of the issue one year earlier.

State Auditor Tim Keller said the study’s findings show a government too reliant on contracts that are not put out to bid, as well as a purchasing system that is complex, decentralized and rife with loopholes. “The spirit of procurement is to safeguard tax dollar funded contracting from fraud, waste and abuse,” Keller said in a statement. “Strong directive executive leadership and a reworking of the law to make bidding more effective and efficient would have a game-changing impact on creating local jobs, cutting red tape, and providing essential services to New Mexicans at the best value.”

The biggest share of state spending outside the usual purchasing process goes to goods and services that are bought by one state agency from another or from a local government. Those purchases are usually exempt from competitive bidding. And certain health care spending, a major expense for the state, also falls under what is known as “sole source procurement,” which is when an agency gives the contract to one company without competitive bids.

State agencies can buy goods and services from private companies without a competitive, open bidding process only when one company sells a particular product or an emergency requires officials to move quicker than the time it takes for competitive bids. However, agencies must make an effort to find other vendors and detail the reasons for an emergency. The state’s rules warn that agencies are not supposed to bypass the usual purchasing process because staff believes one particular option is best or the least expensive.

The report raised concerns that the General Services Department and the Department of Finance and Administration “do not always provide adequate scrutiny.” As a result, the report said, agencies can get away with no-bid contracts that do not meet the state’s rules.

The State Auditor’s Office suggested consolidating oversight of the purchasing process, which the Legislative Finance Committee has long recommended. The report also called for additional training of all state personnel involved in procurement and suggested legislators comprehensively review the exemptions and exceptions in the state’s purchasing law.

Sen. Sander Rue, R-Albuquerque, has sponsored legislation reforming the procurement process but said lawmakers may need to revisit the language of the current rules. Rue said the state should open up the process even further by, for example, making public how officials choose winning contracts.

“The more transparent and open procurement is,” he said, “the less you are to have mistakes, errors and perhaps mischief.”

Note: New Mexico is one of a couple of dozen states, including the Territory of Guam, that use the principals and are guided by the processes of the ABA Model Procurement Code.

No emergency, just a desire to act quickly, like business

The procurement issues here raise issues of noncompetitive acquisitions, the requirement to obtain a fair and reasonable price before acquiring anything, even by sole source, and the contrast between government acquisition and private business. Government contracting requires market research to have independent knowledge of source alternatives in the market, prices and costs, as part of the acquisition process before a selection process is even chosen.

The governance policies of government acquisition are intended to assure transparency and the pursuit of effective competition within the free enterprise system. It is meant to avoid the secretive and arbitrary selection of colleagues and strong-arm "horse trading" linked to matters far afield from the instant acquisition that is the norm in private business ("you scratch my back and I'll scratch yours").

Government procurement is concerned with public confidence, fair and equitable treatment of market participants, maximization of public funds, and safeguards to establish and maintain a contracting system of integrity with accountability to the public. It's not meant to trade products or services for votes or favors or other "godfather offers".

In these respects, government procurement is intentionally designed to be the antithesis of private business, especially private business whose only concern is the welfare of the business owner. Not that there is anything wrong with that in the context of people betting their own money in their own smoke-filled rooms or out on the golf course or the box seat of some entertainment venue. 

But, private business has no concern about other people's money, whereas government must be concerned with other people's money or face a fractious public, as well as a mutinous supply of vendors. 
 
Again, I advise readers of articles I present to read the articles themselves, at the link provided. I omit, rearrange, slice, dice, paraphrase, editorialize and generally use the general fact situation of articles to provide teachable moments concerning procurement practice and principle. My version may or may not reflect the article's author's intent, and likely do not to my re-working of the following story, so read the original; click the link at the title.


No competition, no cost estimate as Kansas City firm picked for coveted VA contract McClatchy Washington Bureau

The federal government typically awards contracts to private companies after a competitive bidding process in order to keep costs low and avoid conflicts of interest. “When you have competitive bidding it prevents government officials from throwing contracts to their friends or keeping them from people they don’t like,” said Richard Painter, chairman of the board of Citizens for Responsibility and Ethics in Washington, a nonpartisan watchdog group.

But, the Trump administration picked Kansas City-based Cerner Corp. for a coveted contract to modernize veterans health records, and there will be no competition for the taxpayer-funded project. Cerner partnered with defense technology contractor Leidos, Accenture Federal Services and Intermountain Healthcare in its bid for the $4.3 billion, 10-year defense contract. Other health IT companies didn’t have a chance.

VA Secretary David Shulkin told reporters his decision to waive competition and acquire Cerner’s software directly was motivated by President Donald Trump’s desire to act quickly. “From the outset that when the president selected me to be secretary, he made clear to me that he expected us to act with faster decisions, to act like business, and to really make sure that we are really doing the right thing to change veterans’ health care. And that's exactly what we’re trying to do today,” Shulkin said.

Shulkin said there was a “public interest exception” to allow awarding the Cerner contract without a “full and open competition.” The VA still must draw up a justification for waiving open and public competition, and Tester’s office will be following up with VA for those documents, said his spokesman, Dave Kuntz.

Sen. Jon Tester of Montana, the top Democrat on Senate’s Veterans Affairs Committee, was supportive of Shulkin’s announcement but his spokesman said he has some questions and concerns about timing and costs that the secretary did not answer. Neither Cerner nor the Department of Veterans Affairs could say how much the contract will cost, however.

“The challenge here is that by giving up competition, the VA has given up all control to the company” when it comes to price, said Phillip Carter, a senior fellow at the Center for a New American Security who teaches government contracts law at Georgetown University Law Center. “At the end of the day ... they’re probably going to pay whatever Cerner asks,” Carter said.

The new VA health records system won’t be identical to the Defense Department’s, but its core will be Cerner’s Millennium software, Shulkin said on Monday. He said Cerner’s work on the Pentagon’s system, now known as MHS Genesis, pushed his decision in Cerner’s favor. Adoption of the same system “will ultimately result in all patient data residing in one common system,” the secretary said.

To me, adopting a system that will ultimately result in "all data residing in one common" (but proprietary) software will assure everyone else will become locked out. There are historical precedents, such as Motorola's lock on emergency radio systems, and Microsoft's lock on desktop software systems. See, Sure, Kid, first one's free.


The US government has been trying hard to break free of such locks.  This procurement seems to also go against the US Government's Federal Source Code Policy: Achieving Efficiency, Transparency, and Innovation through Reusable and Open Source Software:

When Federal agencies are unable to identify an existing Federal or commercial software solution that satisfies their specific needs, they may choose to develop a custom software solution on their own or pay for its development. When agencies procure custom-developed source code, however, they do not necessarily make their new code (source code or code) broadly available for Federal Government-wide reuse.

Even when agencies are in a position to make their source code available on a Government-wide basis, they do not make such code available to other agencies in a consistent manner. In some cases, agencies may even have difficulty establishing that the software was produced in the performance of a Federal Government contract.
These challenges may result in duplicative acquisitions for substantially similar code and an inefficient use of taxpayer dollars.

This policy seeks to address these challenges by ensuring that new custom-developed Federal source code be made broadly available for reuse across the Federal Government. This is consistent with the Digital Government Strategy’s “Shared Platform” approach, which enables Federal employees to work together—both within and across agencies—to reduce costs, streamline development, apply uniform standards, and ensure consistency in creating and delivering information. Enhanced reuse of custom-developed code across the Federal Government can have significant benefits for American taxpayers, including decreasing duplicative costs for the same code and reducing Federal vendor lock-in.

Note also the internationally informed Open Source for Government component of the Open Spouse Initiative.

Other article(s) on this topic: VA to dump Vista for DOD's electronic health record system

The anti-competitive multiplier effect of having no effective scope of contract change limitations

Canberra outsourcing deal quadruples to $390 million

The Australian Department of Agriculture signed a technology support deal with EDS in 2009 for $96 million. Since then, EDS has been acquired by HP Australia, and HP has twisted and turned and split and merged to become HPE , HP Inc, or DXC Australia.

The comprehensive managed services arrangement runs the gamut of IT services. When Agriculture took the work to market back in August 2008, it envisioned the contract would cover managed desktop, desktop LAN, midrange, storage area networks, helpdesk, Macs, and project services.

Work orders signed in December last year have now taken the value of the deal to over $390 million, more than four times its original value. And this figure is likely to keep growing until 2022 when the present iteration of the deal expires, at which point it will be 13 years old.

Despite a recent clause added to the deal which allows the department to take it back to market at any time it wants “if the performance of the services does not meet clearly defined and agreed requirements or if the value for money requirement is no longer being met”, a spokesperson for the department told iTnews there were no foreseeable plans to market-test the nearly $400 million deal.

The Department of Finance confirmed that the Commonwealth procurement rules don’t place any cap on the number or value of amendments that can be applied to a federal government contract.

"In order to ensure transparency in government procurement activities, entities are required to report contract amendments and variations on AusTender, including any increases to the total contract value," Finance said. Since 2009, Agriculture has published 227 such variations on the procurement website.

The rules also dictate “any variation to a procurement contract should not significantly change the scope of the contract”.

The procurement rules do, further, insist that “officials must achieve value for money in procurement”.

Agriculture insists it is doing so - even in the absence of any real competition. It called in procurement consultants, who calculated it would cost the agency more to run a new approach to market than it stood to save.

“The review found that the third party service provider was delivering the services to the expected level for a price that was market competitive at that time," a spokesperson said.

IT outsourcing has long been a point of controversy in Canberra, where the cost of running complex and highly regulated multi-year procurement programs often convinces agencies to stay with the same supplier for many years.

In 2015 the Department of Health switched to Datacom after 15 years with IBM.

And the Department of Defence continues to insist it is too busy to refresh its paired distributed computing deals with Unisys and Fujitsu, which are nearing the 20-year mark.

In the US, the concept of scope of the contract is taken a bit more strictly. While not necessarily determinate, a "large" price increase raises the suspicion of a change beyond the scope of the contract.

Plus, the scope of the contract is examined in the context of the contract's intent as the time it was solicited, not during some evolutionary period of the services actually performed. A comparison of the actual services presently being rendered in comparison to those actually solicited in the original contract may reveal a change in the nature, scope and character of the service of such magnitude that the government, and taxpayers, would be better served if it went back out to bid.

Also, in a rapidly changing time of technology, when the field of competition could be expected to provide newer technology at more competitive rates, the change in the field of competition can also influence what is meant by a "significant" change in the scope of the contract.

Too often, the cozy arrangements with an incumbent and a procurement staff not wanting to be bothered to "foster effective competition", as the American Bar Association Model Procurement Code mandates, results in situations like this, where there is rampant contract price inflation. No appraisal (which is what the third party review was in reality) is as tell-worthy as good old-fashioned competition. A dozen expert opinions of a horse will not tell a winner from a loser better than the race.

Contract administrators must not only monitor the services rendered and paid for, they must also monitor the services contracted.

When cooperating isn't as good as competing

An Editorial from the Pennsylvania TribLive:


Tribune-Review | Monday, April 10, 2017, 11:00 p.m.
Costs through the roof: Require competitive bidding

Closer scrutiny of how tax dollars are spent on school roofing jobs could well help taxpayers keep roofs over their own heads.

Pennsylvania is among 23 states participating in the Association of Educational Purchasing Agencies, “which funnels roofing projects through” national contractor Tremco, writes Robert Dziuban, Coalition for Procurement Reform executive director, in a PennLive column. He notes a survey that found Pennsylvania school districts buying roofs through the AEPA “spent $100 million more on the projects from 2005 to 2010 than they would have through public competitive bidding” — and that other studies have shown “the process of overcharging continues.”

Tremco corporate parent RPM International in 2013 paid $65 million to settle a whistleblower lawsuit filed by the U.S. Justice Department. The lawsuit alleged RPM “defrauded the General Services Administration and other government entities by overcharging on roofing contracts as far back as 2002,” according to Mr. Dziuban.

Cooperative group purchasing works for pencils and computers. “(B)ut construction projects are not commodities,” Dziuban reminds. State Rep. Kerry A. Benninghoff, R-Centre/Mifflin counties, agrees, saying “each school building is unique.”

Mr. Benninghoff is drafting legislation to require competitive, local-level bidding for roofing projects. Enacting such a law is a no-brainer. The sooner that happens, the better for Pennsylvania taxpayers.

Sole searching in Oakland, CA?

Courthouse News Service, which is a nationwide news service for lawyers and the news media, filed the following story. This shortened version is intended to alert you to the item and tease you to go to the sourced link and read it in full. Especially since I cut, paste, omit, edit, rearrange and paraphrase to suit the educational content and intent of this blawg; so you must read the original and not take my version of it as true, complete or accurate.

Oakland Playing Fast & Loose With Contracts, Bidders Say

Competitive bidding is meant to secure the lowest price for a project by creating competition and ensuring contracts don't go to pre-selected firms. So when an agency wants to sole-source a contract, it must justify the move internally and get it approved. If that doesn't happen, officials can use sole-sourcing to steer contracts to favored firms and exclude cheaper bidders — raising project costs that taxpayers ultimately pay.

"They're trying to convert the process from a shield-bidding process to a negotiation process and at the federal level, it's not appropriate," said Steve Sorret, an attorney with Kutak Rock in Washington and a former curriculum director for The George Washington University Law School's government contracts program. "What they're doing here certainly goes against the grain of a typical public contracting process."

In a city known for awarding fraudulent contracts, routinely sole-sourcing its projects signals entrenched problems in the way Oakland does business, and in how that affects residents. The City Council currently faces findings by the Alameda County Grand Jury that it improperly awarded a $1.5 billion trash collection contract to an unqualified recycler. The 2014 deal sent garbage collection fees skyrocketing, prompting a group of Oakland landlords to sue the city earlier this year.

And in a 2013 report, the city auditor blasted councilmembers Desley Brooks and Larry Reid for breaking the law by steering part of a $2 million contract for demolition work at the former Oakland Army Base to a friend's company after the city had already begun negotiating with another contractor. Those initial negotiations, too, were illegitimate since municipal law requires the contract to go up for competitive bids first. Brooks also negotiated three separate contracts for a teen center in East Oakland, something only the city administrator can do.

Emboldened by high-ranking officials willing to look the other way when councilmembers break the law, the Oakland City Council routinely waives its legally mandated competitive bid requirement for awarding construction contracts worth more than $50,000 and negotiates the contracts directly with firms of its choice, according to a report by the city auditor.

The council simply relies on a statute allowing it to reject bids it deems invalid — or "nonresponsive." And at a City Council meeting on Tuesday, it blessed another competitive bid waiver, this time for the $400,000 renovation of the Dimond Branch library in East Oakland. Instead, the city will approach construction firms and negotiate with them one-on-one in a process known as sole-source contracting.

But falling short of small business goals and bidding over the project price don't render a bid nonresponsive. If a bidder fulfills all of the requirements for submitting the bid, they are by definition responsive and both Greentech and Wickman satisfied those requirements.

Jonathan Wickman says the city violated its own laws in deeming his firm's proposal nonresponsive so it could justify moving to direct negotiations. "That doesn't seem legal to me," Wickman said. "They should rebid it or find more money and rebid with more money in the budget. It's not like they're left with no avenue."

A counterproductive way to deal with emergency no-bid acquisitions

New board approves millions in no-bid contracts (Read full story at the link)

The revamped Personal Services Contract Review Board is part of a contracting reform bill the state Legislature passed this year after much debate, with the Senate watering down sweeping House proposals.

It appears the Legislature, in its wrangling over contract reform, may have inadvertently given agencies a potential out on competitive bidding.

Numerous agencies requesting approval of contracts and exemptions from bidding quoted the new law that allows exemption if “utilization of a competitive bid procurement would have been counterproductive to the business of the agency.” Now agencies appear to be using it as their reasoning for not competitively bidding contracts.

The legislation was driven by a Mississippi Department of Corrections bribery and kickback scandal. Former state Corrections Commissioner Chris Epps ran one of the largest and longest-running criminal conspiracies in state history. He took about two million in bribes over eight years in exchange for steering hundreds of millions of dollars in prison contracts to a former lawmaker co-conspirator.

The contracts subject to Epps’ malfeasance had been approved by the state Personal Services Contract Review Board. After the prisons bribery scandal, state leaders — and a task force created by Gov. Phil Bryant to recommend reform — criticized agencies’ use of “emergency contracts,” exempt from bidding, for goods and services that did not appear to be emergencies.

The reform legislation revamped the board to include citizen members appointed by the governor and lieutenant governor. The board, holding its second monthly meeting Tuesday, has only four members because Lt. Gov. Tate Reeves has not filled his appointments. The directors of the State Personnel Board and Department of Finance and Administration also serve on the board.

On Tuesday, the PSCRB questioned numerous “emergency” contracts approved by agencies, including two recently inked by MDOC worth more than $60 million combined. MDOC entered into an $11.6 million emergency contract with Valley Services for feeding inmates and a $48.8 million one with Centurion of Mississippi for medical services for inmates. Both are for a year.

New board member Bill Moran of Tupelo questioned why feeding inmates and providing medical care were deemed emergencies and the contracts not put out for bid. “Why can’t you at least take the time to get RFPs?” Moran said. “This is $60 million, and nobody’s put a pencil to it. Have you not had time to do that?”

Stanley Brooks, MDOC director of prison agriculture enterprises, said the agency did attempt to get quotes but ran into problems with the previous PSCRB and the contracts were running out, so feeding and caring for inmates became an emergency. At the board’s direction, Brooks said MDOC would try to quickly get RFPs from vendors — within a couple of months — and can back out of the emergency contracts with a month’s notice.

Moran also questioned several emergency contracts worth more than $200,000 from the state Oil and Gas Board — extensions to previous emergency contracts — for companies to plug and abandon oil and gas wells. “How is it an emergency when these wells have been sitting there for years?” Moran said.


House Accountability, Efficiency and Transparency Chairman Jerry Turner, who authored the House reform bill, said this is the result of the Senate stripping out much of the House plan before it passed the bill. Turner said the new board has the authority to establish tougher rules and regulations on bidding and emergency contracts and to force state agencies to seek best prices. He said he hopes it will. “But if they can’t, we can go back in the Legislature and put new language in there,” Turner said. “We are not going to sit by and watch all those problems we’ve had still be allowed because of misinterpretation of the language.”

I might note, Guam procurement law (5 GCA § 5030(x)) defines "emergency" as:

"a condition posing an imminent threat to public health, welfare, or safety which could not have been foreseen through the use of reasonable and prudent management procedures, and which cannot be addressed by other procurement methods of source selection."

Sure, Kid, first one's free

In the face of rising new technologies, it is tempting to place mission critical facilities into the hands of the apparent rising star. Think Microsoft's early DOS, for instance. Or, more pertinent to this post, Motorola's emergency radio system. 

Microsoft's DOS and its Windows progeny, and Motorola and its hand-held radios are ubiquitous, not because they are the best in show now, but because they were best in show when the curtains went up on the show. And like Vaudevillians, they refuse to retire gracefully, even in the face of newly emerging and disruptive technologies offering more effective and economic solutions. If only they would embrace an open source system. By doggedly hanging on they loose their luster and prestige; they become speed bumps in the race to the future.

I think, to foster competition (which is a fundamental principle and requirement of US federal and local procurement laws based on the ABA Model Procurement Code), no technology should be purchased with government funds for what is or is likely to become a standard and commonly used piece of equipment (or software) unless the vendor offers to submit its proprietary rights in the equipment to open sourcing after a limited period of time: say, five years. They don't have to sell to the government if they don't want to. And rising technologies bring out competition, so the government would not long be left out of the loop.

I have mentioned the Motorola example before, here and here. But it's a story that won't go away, as seen below. The the full stories at the links.

Want government reform? Idea #3: A new public safety communication strategy

Have you ever noticed how police officers carry both a cellular phone and a hand-held radio? It might surprise you to learn that you are paying hundreds of times more for the radio than the cell phone. And you’re about to pay millions more unless we have the courage to change course.

Today there are as many mobile phones as people, prices have fallen and consumers have benefitted from innovation that led to iPhones, Windows Mobile, Droid and other robust platforms. The change has been technically disruptive and positive. In that same time, the nation’s public safety community—law enforcement, fire, EMS—has also spent billions of public tax dollars on new infrastructure and yet the quality, cost and functionality of their expensive, proprietary, two-way radios has not materially improved since the 1970s.

The uncomfortable truth is that for city, county and state governments public safety radio equipment costs between 10x and 100x more than it does in most other countries, despite the U.S. leadership position for wireless technologies such as smartphones, WiFi, WiMax and more. The reason is that the nation’s public safety communications market does not enjoy healthy, vibrant, market-based competition in any way comparable to consumer mobile services.

Our nation’s first responders and 9-1-1 dispatchers aggressively moved to establish an industry standard for first responders called “P25” to get better radios at lower prices, to break the monopoly of the current structure. Unfortunately, more than 25 years later, P25 is still not available, still not implemented and even the Chairman of the FCC recently jolted Members of Congress by acknowledging “…[P25] has taken more than 20 years to develop and is still not complete” and “the protracted development of P25 has allowed vendors to take advantage of selling proprietary solutions.”

If our state’s march toward P25 continues, it will be more business as usual – and first responder radios will still cost $5,000 each. Just one P25 radio for one police officer costs $5,000 and yet it has less processing power and functionality than an iPhone, Windows Mobile or Droid phone. Public safety is building their own mirror system to commercial services. A mirror system that is on track to be proprietary, closed, and expensive like our existing first responder radio systems.

We should stop buying P25 radios at literally $5,000 per radio and start buying TETRA radios. TETRA is similar to P25, but it is truly open standard radio used by police and fire departments in Europe and Asia . They offer more features and are tested around the globe… and cost less than $500 each. They are essentially “Nextel-like” in their capability but are a fraction of the cost of the non-open standard P25. We should absolutely back a national broadband plan – but not this one. Not until it is legally bound to an open, public standard that enables true, free market participation from any and all vendors. Not a penny of federal or state funding should go towards any proprietary 4G/LTE solutions.

Faced with a tech tsunami, Motorola fights to preserve cop-com franchise

As Chicago cops braced for protests in advance of the NATO and G-8 summits in 2012, hometown radio giant Motorola made what seemed like a grand gesture. The company, which for years has used tenacious marketing and clout to reign over the emergency radio business, donated to the city $1.8 million worth of telecom equipment that could beam data and videos to law enforcement officers shielding the world leaders. Motorola Vice President John Molloy said the company also could operate a network for the city as a “test platform” until year end and provide Chicago’s public safety agencies entrée to the world of emergency broadband LTE – the new global standard for transmitting huge amounts of data at rocket speed.

Motorola’s gift was designed to keep on giving.

From Mississippi to Texas and California, the company now known as Motorola Solutions Inc. has reshaped its business strategy in the face of a technology tsunami that threatens to upend its decades-long hold on the emergency communications market. While fighting to preserve its immense walkie-talkie franchise, Motorola has maneuvered to become a player in broadband, where it must contend with new and bigger competitors in a scrum for billions of dollars of taxpayer funds pledged for a coast-to-coast emergency data delivery network.

Motorola’s aggressive push into broadband, however, is a cause for consternation among officials of the First Responder Network Authority, or FirstNet, the Commerce Department agency tasked with building the first nationwide public-safety communications system. To garner broadband business, Motorola has relied on many of the same strategies and deep customer relationships that helped it capture more than 80 percent of the radio market.

As McClatchy reported in a series of articles last year, the industry giant has landed scores of sole-source radio contracts and wielded enough pricing power to sell its glitzy handsets for as much as $7,000 apiece, at a taxpayer cost of hundreds of millions, if not billions, of dollars that could have been saved in a more competitive market.

Motorola rival charges FBI’s new radio deal also biased

For the second time in a year, the FBI’s attempt to replace its 30-year-old two-way radio network could be stalled because of accusations that the bureau is skewing its bid solicitation to favor Motorola Solutions Inc., the emergency communications industry’s dominant player.

Last year, the bureau scrapped a plan to hand Illinois-based Motorola a sole-source contract worth up to $500 million, including upgrades for other law enforcement agencies, after four competing vendors filed protests.

Now the FBI has sought competitive bids for a contract limited to modernizing its own network at a cost of about $200 million, but the action is still drawing allegations of bias from Motorola’s biggest rival, Harris Corp., which has formally protested. The conflict offers the latest evidence of how difficult it will be to break one company's market power over a multibillion-dollar business underwritten solely by taxpayers.

The FBI’s dilemma is that it wants its agents’ radios to be able to connect with all of the thousands of law enforcement agencies nationwide. But many state and local systems use older Motorola equipment with proprietary designs that cannot interact with other manufacturers’ products, meaning that Motorola’s rivals cannot meet the bureau’s requirement.

Motorola Solutions’ monopoly on radio systems needs to end

In 2005 San Francisco Sheriff, Warren Rupf, and Alameda Sheriff, Charlie Plummer, decided that because of the failures of communication during 9/11, they wanted to implement a new digital two-way radio system so that all of their first responders could talk to each other.

Unfortunately, Motorola Solutions stood in the way. Motorola had no interest in allowing for any competitive bidding process. Before the Sheriff’s could try to solicit bids for such a radio system, they were told that any plan must include the first $5.7 million going towards a master controller made by Motorola and any equipment must connect with the older, antiquated Motorola SmartNet II system.

A seven-month McClatchy investigation found that local and state politicians around the country have helped Motorola secure an estimated 80 percent of all the emergency telecommunications business in America. The politicians help Motorola by giving them noncompetitive contracts, modifying years-old contracts to acquire new systems or by crafting bid specifications to Motorola’s advantage. [Read the story for more on this study.]

In 2004, a Sept. 11 commission recommended that the nation’s public safety community adopt measures to improve interoperability, meaning that all radios must interact no matter their manufacturer. Yet, Motorola has continued to fight such interoperability. In Colorado, Louisiana, Kansas and other states, Motorola has found ways to insert software encryption that serve no purpose other than to not allow rival companies to interact with them. John Powell, a former chairman of a National Public Safety Telecommunications Council panel, criticized federal agencies for failing to put enough “teeth in those grant guidance documents” to ensure against proprietary features, such as Motorola’s encryption.

Et cetera

Virginia's road project got PPP'd on

How Virginia paid more than $250 million for a road that never got built

The problems help explain why top officials in Gov. Terry McAuliffe’s administration have recently increased scrutiny of public-private partnership deals, a sharp shift in tone in a state that has for 20 years been a national leader in pushing such projects. Transportation Secretary Aubrey Layne said this month that the I-66 project should not be ceded to private investors for “ideological” reasons, as might have happened in the past. Keeping the construction of toll and carpool lanes under state control could generate hundreds of millions of dollars for additional transportation projects, he said, and avoid a repeat of cases in which the state was left “holding the bag.”

Virginia officials are trying to get back tens of millions of dollars from a private company that was supposed to build a 55-mile toll road in southeastern Virginia. State officials had been sending the company multimillion-dollar installments each month to build the road. But the state lacked federal construction permits, so the road wasn’t built. And now the commonwealth is out about $256 million.

Virginia officials governed the project using the state’s Public-Private Transportation Act, which went into effect 20 years ago and gave officials extraordinary flexibility in pairing public projects with private firms. The idea was to try to tap the construction expertise, business acumen and cost-consciousness of private companies, with the benefits flowing to shareholders and state taxpayers. If Virginia officials didn’t have the stomach to set aside large sums to add long stretches of highway, they could lure private investors to put up much of the money. Companies would cover project costs and company profits with the decades of toll revenues they collected.

Among the critical problems, Layne said, was a sort of automatic payment plan, which sent millions to the firm monthly starting in early 2013. Those routine payments were in addition to funds sent to cover specific work that was completed. "Payments continued to go to the contractor for things they knew couldn’t possibly be accomplished, because they didn’t even have a permit,” Layne said. Del. S. Chris Jones (R-Suffolk), chairman of the House Appropriations Committee, said, “I can’t think of a worse contract that I have seen in my years of public service.” Jones said that the deal was rushed to avoid political scrutiny.

Layne said he was not seeking to disparage state representatives, but noted that they emerged from a more “process oriented” background within state agencies and lacked the entrepreneurial and negotiating experience and resources of private firms. Private negotiators had often been doing a much better job than their well-meaning state counterparts. “These guys are buying the best attorneys in the world.”

Layne said the company negotiated in good faith. It is the commonwealth’s responsibility to protect its interests, he argued. “I don’t think they’ve done anything that wasn’t allowed in the contract,” Layne said. But, “I’m not saying it was a good contract.” “I don’t blame them for taking the money. It was a negotiated payment schedule,” Layne said. “They didn’t ask to stop getting payments. . . . If I were them, I wouldn’t either.”

The initial concept was that a private firm would pay to build the toll road and control it for decades, a major undertaking with significant risk. The Public-Private Transportation Act allowed many of the state’s basic procurement rules to be bypassed, Layne said, a feature intended to give the state flexibility to find the best deal.

But private firms balked at taking long-term control of the road because traffic tallies and resulting toll revenues were projected to be too low. So state officials changed course. They decided they wanted to hire a company whose primary responsibilities would be to design and build the road. But in a quirk of the transportation act, the state’s basic procurement rules — which limit certain types of financing arrangements and require more rigorous oversight — did not kick back in, even after the nature of the project shifted radically.

State officials then failed to invite a wider group of firms to vie for the business. That left just the three groups that had been competing for the original public-private partnership, Layne said.

Officials “continued to negotiate with a group that was really set up to do something else,” Layne said, noting that only a few large firms had the needed financial heft and inclination to finance, design, build and operate the project as it was initially envisioned. “Had they opened it up, they would have had many more firms willing to bid on this particular project,” Layne said. “It was basically, ‘Build the road and turn it over.’ ”

And more competition could have brought a better deal, he argued.

Project executives with the two firms that make up 460 Mobility – Ferrovial Agroman, a major multinational construction and engineering concern with roots in Spain, and a Pennsylvania-based building firm now known as Allan Myers – declined to comment. “Our employees and contractors have been professional and accommodating throughout the commonwealth’s reconsideration of this project,” said Shannon Moody, 460 Mobility’s public relations manager.

The "Toyota Way" has gone wayward

Over and over, we hear that government should purchase like private business, and develop better working relationships and collaboration with its suppliers. Maybe, but consider this case in point (please read the article at the link): Daihatsu Dismantling 'Toyota Way' As Market Changes, by Norihiko Shirouzu, Reuters

Daihatsu Motor Co launched the Mira e:S minicar in 2011, and the car was a hit. A number of improvements – in manufacturing, engineering, procurement – went into the car. But the real secret to success, says Kosuke Shiramizu, Daihatsu’s chairman at the time, lay in taking something out of the company’s business model. Daihatsu shaved off roughly $1,000 in the manufacturing costs of the car by dismantling its keiretsu - an informal but close interlocking business relationship between a manufacturer and its suppliers, cemented by cross-shareholdings and personnel exchanges.

Keiretsu, pundits preached, defused adversarial relationships between assembler and supplier, allowing them to share information and create better product quality. Hence Japanese automakers were able to leap ahead. [Cause and effect are not so easily understood.]

Shiramizu says the days of the keiretsu are numbered. Companies, he says, are competing for price and value by using market mechanisms instead of relationship-based arrangements. "The Toyota way is the high-cost way,” says Shiramizu, 74, in an interview at Daihatsu headquarters in the Osaka suburb of Ikeda. “Keiretsu doesn’t work anymore. If we stick with it, Daihatsu won't survive. Toyota might face a similar fate, too."

Shiramizu, who became advisor to Daihatsu's board and technical executive after stepping down as chairman three and a half years ago, says his parts procurement reform isn’t meant to be a template for Toyota. But it is being taken seriously there, he says.

Two major shifts over the past two decades in the competitive landscape have been working against Japanese car makers and their keiretsu systems.

First, Western rivals dramatically closed the gap with the Japanese. That was partly due to the fact cars have become easier to design and manufacture, because they are less mechanical and are controlled more electronically. Competition thus shifted to who could offer more value to the customer: the highest fuel economy, the sexiest look, and the most compelling functions for the lowest price.

The other competitive shift came from the emerging world. Keiretsu worked beautifully for Toyota because an overwhelming majority of the finely engineered cars it made were sold in the high-priced developed markets of the United States, Europe and Japan. That began changing in the early 2000s, with the rise of emerging economies such as Brazil, Russia, India, China, Indonesia, South Africa and Turkey. These economies already collectively buy half of the automobiles sold worldwide today.

Daihatsu is mostly in the lower end of the market. As it began buying more components from Toyota-group suppliers such as Denso and Aisin Seiki over the years, it was also stuck with Toyota's lofty quality standards. Shiramizu says Toyota’s specs are often too high for vehicles that some Daihatsu officials describe as “sandals,” as opposed to the dress shoes that Toyota makes. “Do we need parts and cars that withstand the desert heat in Arizona?” Shiramizu asks.

Shiramizu's first move was to send agents of change into the company’s procurement office. Until then, Daihatsu's purchasing office was staffed by non-technical types with little knowledge on how components are designed and produced and, says Shiramizu, "no ability to assess true cost." Instead of attacking costs, those purchasing managers put a priority on their relationships with suppliers - getting wined and dined and showered with gifts in the process, Shiramizu says.

Shiramizu then initiated another move: abolishing the “account” system that governed procurement deals. The status quo, he says, made it almost impossible for new, non-Toyota-group suppliers to do business with Daihatsu, even when they offered better quality and price. Under the account system, only existing suppliers with Daihatsu accounts could supply parts to Daihatsu. [Sounds a bit like the "best value" focus on "proven reliability".]

It allowed Shiramizu to deploy his new procurement leaders in the hunt for lower-cost parts across Japan - and beyond to China, Indonesia and India. Inoue, who was plucked out of the production engineering division by Shiramizu, and his team focused on China. The team quickly found Chinese suppliers of windshields, mirrors, speakers, and aluminum wheels at savings up to 50 percent.

One of the team's most critical findings was not a new supplier, however. It was the discovery that some account holders were slapping a hefty margin on components they procured cheaply in China.

Daihatsu last year bought approximately 1.3 billion yen worth of aluminum wheels in China without going through middlemen. “We have too many middlemen skimming off," Shiramizu says. "Getting rid of those middlemen is the shortest cut to cost savings.”

Buying directly from those suppliers has made the job of procurement specialists more complex. They have to ensure that the logistics for parts delivery are sound, making sure equipment orders are delivered to plants on time. It's worth it, Daihatsu officials say.

The China team discovered factory hubs in the eastern China province of Zhejiang for dirt-cheap generic auto parts – or, as one Daihatsu executive puts it, “fakes.” The results have been mixed: Designs by the generic parts producers are often robust, but the production quality is unreliable, according to Daihatsu officials.

One solution being pursued now is to produce on its own many of the core, high-ticket parts Daihatsu currently buys from Toyota suppliers. Those include air-conditioning and steering systems, drive shafts and wire harnesses. “Toyota suppliers aren't going to like it,” one official says, “but our basic philosophy is to go ‘in house’ - and that means no more middlemen.

Daihatsu had to find a better way to procure when it faced an austere emerging marketplace. That is exactly the condition the US, and other advanced economies, are in: austerity is the new black.

One of my takeaways from this fascinating case study is that we should not allow a fully assembled (or "bundled") product to determine if something should be made subject to "best value" rather than low price bidding.

Here, Daihatsu took the product apart, and even if it did not then acquire each part independently, it learned the true cost of the product, and that is a valuable piece of knowledge when buying in bulk, versus building in house. That's some serious market research.

An article I referenced in a recent post contained a statement by the author of it, Eric S. Crusius, that

"prior to the 1984 Competition in Contracting Act, which jumped-started best-value contracting in the federal marketplace, a common refrain heard in the federal market was “good enough for the government.” In other words, the government was content to settle for mediocrity—or worse."

That's a curious turn of phrase, as pointed out by the distinguished James F. Nagle, in his treatise, "History of Government Contracting". He points out that, in the early days of US procurement, before the Civil War, the government abandoned purchasing weaponry and other things from manufacturers when it found it could make all the parts and then assemble them "in house" in US armories and ship yards. It thereby developed the specifications needed to get exactly what it wanted, both in house and from suppliers. He says,

The rigorous inspection standards gave rise to a saying still in use today but with vastly different meaning. The saying was "close enough for government work". Originally the saying was a boast by contractors to would-be commercial customers, that their products were so well manufactured that the government would accept them even with its known high standards. Unfortunately, by the middle of the twentieth century because of scandals [recounted in the book], the same saying now is used to denote a feeling by a contractor that even shoddy work will be accepted by the government.

If we are ignorant of history, we are bound to repeat its mistakes. Taking the steps Daihatsu has taken are something out of the early days of US federal procurement; if they can do that and avoid the scandals Dr. Nagle described, we may go somewhere in procurement where man has gone before, but survive it with our integrity intact.

Procurement controversy -- District of Columbia streetcar deal

Note: As I am wont, the following procurement controversy case study for today was cut, rearranged, and otherwise "edited". You are strongly urged to click the link to read the article in its original form if this subject tickles your interest.

The District’s streetcar deal leaves taxpayers holding the bag

IN THE market for streetcars for a planned trolley line, the District of Columbia undertook a lengthy procurement process in 2010.  Inekon, a Czech company that had built the District’s first two streetcars, a company with a proven track record in designing and manufacturing streetcars got the highest ranking in the year-long open competition. But the $8.7 million contract went to Portland, Ore.-based United Streetcar, a firm that had never produced an operational streetcar, had major problems delivering the vehicles and today no longer makes them.

When the contract was awarded to United Streetcar, Inekon protested to the Contract Appeals Board. The case was dismissed after the city acknowledged missteps and agreed to a series of corrective steps.

But instead of continuing that process, it used a provision in procurement law to buy the cars from United Streetcar through the existing contract of another jurisdiction.

I have not been a big fan of the so-called "coop purchasing" method. In my view, it is too often used as a cop out purchasing method. It outsources one jurisdiction's responsibility to another jurisdiction, leading to a large funneling of government funds to one centralized procurement agent who has no accountability back to the purchasing jurisdiction, and makes it problematic for the purchasing jurisdiction to to administer the contract. This case appears to be an example of that.

The theory behind cooperative purchasing is that bulk buying gets the lowest price possible. For instance, the federal supply schedule purchases allow any federal department to purchase from the schedule, as well as states, territories and some NGOs. The schedule acts like a cross between a catalog house, like the old Montgomery Wards or Sears Catalogs, and Amazon.

The theory is good for increasing buying power at the expense of increasing the pool of competition. We encourage competition over monopoly, but we turn around and diminish competition by monopsony.  As Steven Schooner has shown us, here and here, even a fundamental principle of procurement must be balanced against other competing procurement principles. 

Sometimes, the crush to make government contracting as convenient as private contract crowds out the governance principles. Government contracting without governance principles, like fairness and application of principles such as encouraging small or local businesses, does not create an ideal procurement system that satisfies the needs and aspirations of the political base of the purchasing government.

Somewhat related recent articles:

MPs warn over new train contracts

Taxpayers have been left with all the risk over two multibillion-pound contracts for new trains, a report by MPs has said.

The Department for Transport (DfT) decided to lead on procurements of new trains for the Intercity Express programme and for the Thameslink project "despite having no previous experience of doing so", the House of Commons Public Accounts Committee said.

The report continued: "These two major projects also demonstrate yet again that the department has limited capacity and capability to manage large-scale procurements, and that it remains overly reliant on consultants."

The committee's chairman, Margaret Hodge (Lab: Barking), said: "The department decision to buy the new trains itself has left the taxpayer bearing all the risk.

$1.2 billion contract OKd for new Muni Metro light-rail cars

When Muni bought its current fleet of light-rail cars from Italian manufacturer Breda in 1996, Haley said, it didn't buy enough cars and tinkered too much with customizing the design. Its reliability requirements also were too lax and it didn't take maintenance costs into account.

"We tried to learn the lessons from the previous procurement," he said. So the MTA plans to buy more rail cars this time, let the manufacturer handle most of the design, require better performance from the vehicles and consider the costs and time requirements of maintenance.

Not so straight-laced procurement in Victoria, Australia

We begin this post with the following articles. You can and should read the articles in full at the links associated with their headlines. I tend to selectively cut, paste and rearrange them to suit myself in this blawg, and there is a lot of additional information and context that gets left on the cutting room floor.

Office of Living Victoria broke procurement rules, says Ombudsman

Victoria's recently abolished water agency deliberately flouted procurement rules and back-dated documents to award contracts worth millions to consultants in a manner which implied a "jobs for mates" culture, the Ombudsman has found.

In a major setback for Water Minister Peter Walsh, Ombudsman Deborah Glass has found the agency he created, the Office of Living Victoria, to be rife with undeclared perceived conflicts of interest and having lacked respect for "public sector values and accountability for its use of funds". Mr Walsh told the Ombudsman he was not told of the procurement breaches by Mr Fennessy. But Mr Fennessy told the Ombudsman he last year advised Mr Walsh he needed to audit OLV and that more recently he told the minister ''we've got some procurement problems ... this is why I have been saying for the last six months that I need to audit OLV''.

Mr Waller and Mr Want initially reacted strongly to Ms Glass' draft report, rejecting many of the findings. They commissioned legal advice that stated the OLV was not bound by procurement rules because of its status as an administrative agency. Their advice conflicted with other legal opinion held by the government.

The pair later accepted that the OLV should have paid more attention to ensuring compliance with Victoria's purchasing policies. "I accept OLV made some poor decisions," Mr Waller told the Ombudsman. Mr Walsh said on Tuesday that all government departments had to adhere to procurement rules. He said despite allegations against OLV being raised publicly in recent months it was not appropriate for him to interfere.

Victoria's water agency ignored government policies, the ombudsman says.

The underlying attitude at the Office of Living Victoria (OLV) seemed to put procedures and principles second to urgency, Ombudsman Deborah Glass found. "From the earliest days of OLV, the inclination and focus have been on the end, not the means," the report said.

Ms Glass said the prevailing attitude at the office had been that it needed to "crash through" a bureaucracy that would stymie effective and timely change. "Government procedures exist to protect the public purse," Ms Glass said. "Poorly managed conflicts of interest fundamentally undermine the integrity of public policy."

Ombudsman finds water agency, Office of Living Victoria, mishandled conflict-of-interest concerns

The office was established by Water Minister Peter Walsh in May 2012 to manage the change in the way water services are managed in Victoria.

"Conflict of interest was poorly understood and badly managed by OLV."

The ombudsman was also critical of procurement practices in the agency. In one example examined by the ombudsman, three companies provided quotes for events management services. The ombudsman found OLV accepted the most expensive quote without explaining why.

The report found OLV rushed a number of project briefs, quotations and other documents. "In some cases they were prepared after the contract was in place, to give some semblance of credibility to the arrangement," the ombudsman said.

Mr Walsh acknowledged mistakes were made in the management of the water agency but said the OLV had operated effectively. "Good governance and effective and timely policy reform are not mutually exclusive, but having said that, OLV has delivered some significant benefits."

By the way, you can read the whole "Investigation into allegations of improper conduct in the Office of Living Victoria" here, and an earlier 2014 report on "Investigation into allegations of improper procurement of services by the Department of Education and Early Childhood Development" here.

Well now.

First observation, those last comments of Mr. Walsh in the last article above are routine, de rigueur responses typical of government comment when caught with its pants down in procurement.  I call it the "no harm, no foul" defense, even though there is always obvious harm when good governance is given short shrift whilst the means is meant to justify a result.

Second observation, this smacks of a procurement regime that has no real-time procurement police on the beat. It relies on ex post facto reviews, well after the horses have bolted, with the hope that someone will uncover the stuff-up and fix it (or, as is most often the case, with the hope that it will pass unnoticed at all).

I do not believe that ex post facto discovery is any kind of effective prophylactic or deterrent, and is a blunt instrument when error is found that could be corrected. Rather, what we see too often, as in this case, is that the whole baby is thrown out with the bathwater; here, the whole department was shuttered due to failure of its leadership.

For mine, the most effective way to police procurement is to encourage real-time critique and intervention by the people with most real interest in a fair and equitable system, which is commonly called a "protest" procedure. 

Hell hath no fury like a competitor scorned, and that is exactly the cop on the beat you want, provided you have a fair and expeditious procedure for assessing and resolving the protests. It has to be fair or no one will engage the process, which puts you right back where you started from. It has to be expeditious because the government must quickly and effectively address the issue or get sidelined by the controversy.

On Guam, the law requires that all new elected or appointed officials and department heads undertake and every 4 years re-take a one day course in ethics and or administrative safeguards, which includes an introduction to conflicts of interest and procurement. See 4 GCA §§ 15409 and 15410. At least they can't say they weren't told.

That said, consider the following article: Australian government must take ‘great care’ over public procurement rules

The Australian government needs to take “great care” in the policy, practice and operation of public sector procurement rules to work in the interest of the country’s citizens.

That’s the view of senator Kate Lundy, chairman of the Finance and Public Administration References Committee, which has published its conclusions following an inquiry into the operation and effectiveness of the country's procurement rules. Lundy added: “Government procurement decisions may well be a significant determinant of the social and economic health of many Australian communities and regions. As a result, great care needs to be taken in the policy, practice and operation of the Commonwealth Government procurement rules if they are to operate in the interests of the Australian people.”

Recommendations included calling on the Department of Finance to establish an “independent and effective complaints mechanism” for procurement processes. But the department said that it does not support this because there are a “number of opportunities” for people with complaints and there have been a “very low” number of complaints received.

The (procurement) problem with services

Without vouching for the accuracy of the data, there is a provocative view of the amount of money spent on goods vs services in the US government in the recent fiscal year, compared to the numbers of contracts awarded to spend the money. It is posted on/at The Federal Government Spent Hundreds of Billions on Contractors in 2013 [INFOGRAPHICS].

I'll take that at face value for this post.

With 3 out of every 4 awards being made going to goods, we are only spending 1 out of every 3 dollars on goods. Conversely, 1 out of 4 awards spent on services consumes 2 out of 3 dollars spent. This is consistent with the trend of recent decades, from a "things" requisitioning system to a "people" hiring system. During this time, we have found that the more objectively simple means of acquiring things just does not work as well as the subjectively complicated means to hire people skills. And the means of hiring people skills through the procurement system is made all the more competitively adversarial by the big money at stake in people skill contracts.

In the early days of US government contracting, the US made a lot of the things it needed, and did so quite effectively. Indeed, the phrase "good enough for government work" was coined in that time to refer to the gold standard of the product. But investment in manufacture of things, as the private sector knows too well, is fickle, and a government, lumbered with political influence, is not limber enough to move with times and new needs and ways and means of meeting those needs. So, the government gradually moved to outsourcing the manufacture of (most) things.

The same would not be true of hiring people skills if the civil service system, which creates jobs for life, were more facile. Bringing people skills inside would avoid a lot of the procurement headaches associated with the acquisition of services.

Competitive price beats sole source: who knew?!

2nd SC contract provides more monitoring for less

The State paid $12 million to the credit bureau Experian through a no-bid contract that Gov. Nikki Haley negotiated after state officials learned of a cyber-theft last October. That service, dubbed Protect My ID, provided daily monitoring of the three credit bureaus for newly opened credit accounts.

Budget and Control Board director Marcia Adams said Monday the state intends to award Texas-based CSIdentity Corp. the next contract. The contract calls for the state to pay up to $8.5 million, depending on how many people sign up over the next year and when.

Taxpayers affected by last fall's massive hacking at South Carolina's Department of Revenue should get more identity theft protection services at a lower cost to the state under the new contract for state-paid monitoring. But the service provides more extensive surveillance to catch other ways stolen identities are used, including payday loans, sex offender registries and online chat rooms where cyber-thieves sell and buy information. Addresses will be monitored to catch the possibility of mail being fraudulently redirected, while court documents will be tracked in case criminals use an enrollee's stolen ID when they're arrested. The tracing of Social Security numbers should alert enrollees to someone creating a false address or alias using their information.

Legislators were critical of the no-bid contract and its limited credit notifications. They approved extending services and designated $10 million in the 2013-14 budget toward a second year, but they required the state to seek more consumer protection services through the procurement process. "Gov. Haley's main goal has always been to provide the very best in protection and monitoring at the least possible cost and that is exactly what the state will be getting with CSID," said Haley spokesman Doug Mayer.

Read more here: http://www.star-telegram.com/2013/09/23/5187494/2nd-sc-contract-provides-more.html?rh=1#storylink=cpy

African states debate whether procurement rules aid or hinder growth

Rwanda: Continued Engagement On Public Procurement Critical

According to officials in the Ministry of Finance and Economic Planning, when procurement is carried out in a proper and transparent manner, it enhances efficiency and service delivery, thus contributing greatly to economic growth.

In Rwanda, public procurement has come of age. Today, it is responsible for up to 16 per cent of the Gross Domestic Product (GDP).

In the yesteryears there was no such a thing as competitive bidding for government contracts. Bureaucrats only handpicked service providers, often times causing heavy losses to the treasury, especially through shoddy work or uncompleted projects. Today, we can confidently say that we have since managed to reverse the trend. Public officials now know that you cannot spend taxpayers' money without due process.

Nonetheless, some service providers and experts have raised concerns over what they call long-winded procedures and vagueness of the current law on public procurement. They argue that legislation doesn't provide specific guidelines for the day-to-day practices in the sector, thus difficult to implement in some cases.

Under no circumstances should Rwanda's commitment to strict adherence to proper tendering procedures be compromised. We have all seen the fruits of this policy, the most recent being Rwanda's emergence as the least corrupt African country, and among the 'cleanest' in the world, ranking 13th globally, according to Transparency International's Global Corruption Barometer, released last week.

Nonetheless, the Rwanda Public Procurement Authority and other relevant organs, should keenly examine complaints with regard to the existing law, and subsequently initiate the necessary adjustments to help improve service delivery, eliminate red-tape and plug any other potentially costly loopholes.

But, over in Zambia ...

Tedious public procurement processes delaying the pace of national development-Minister

Home Affairs Deputy Minister Nickson Chilangwa says long and tedious public procurement processes are delaying the pace of national development. Mr. Chilangwa said the PF government is failing to execute some of its urgent plans because Zambia’s public procurement processes take long to complete.

He said some of the requirements in public procurement are unnecessary and create an opportunity for corruption. “We have to reform our procurement laws, there is no way we could develop this country if it will take us six months to procure anything for the good of the nation,” Mr Chilangwa said.

He cited the procurement planned procurement of modern crowd control equipment for the Zambia Police Service as one which is being frustrated by the long procurement processes. “Everybody knows that we need to get modern equipment for our officers. There are now more riots breaking out and our officers need better protection and everybody knows the urgency of the matter but if the Permanent Secretary or the IG wakes up one day and say buys the equipment, everybody will start saying abuse of office. This is nonsense and we have to change this.”

He warned that Zambia will continue lagging behind unless serious public procurement reforms are under taken.

Beware of Ministers bringing "reforms".  Sometimes, often times, that word "reform" does not mean what we think it means.

Monopsony: monopoly through the looking glass

Government Should Leverage Its Size to Get Better Prices, Senators Say

“When Wal-Mart buys, I guarantee they get the best price, and when Honeywell buys, they get the best price,” said ranking member Sen. Tom Coburn, R-Okla.

Chairman Tom Carper, D-Del., called the Obama administration’s key procurement officers to respond to Government Accountability Office reports showing that the top four purchasing departments -- Defense, Energy, Homeland Security and Veterans Affairs -- were achieving only 5 percent of contracts using strategic sourcing’s careful analysis of spending needs and markets and rigorous monitoring of vendor prices. “Federal agencies appear to behave more like medium-sized, unrelated businesses than the largest purchaser in the world -- which is what the U.S. government is,” Carper said.

A defense of progress to date came from Joe Jordan, administrator of the White House Office of Federal Procurement Policy. The obstacles include “a decentralized process with a lack of visibility into what other agencies do,” Jordan said. But he cited progress in reducing what once was 4,000 separate wireless phone agreements with 800 plans to one contract vehicle, the saving of $600 million through shared contracts for janitorial services, and the General Services Administration’s office supplies contracts that have upped the rate of small business participation from 67 percent to 76 percent.

Dan Tangherlini, newly confirmed as administrator of GSA, said strategic sourcing in 20 agencies has saved $300 million since 2010. “Contractors are required to report transactional data on all program sales,” he said. “For the first time, this level of financial information collection provides us with a clear picture of agency spending behavior. Over the last several months, GSA has used this data to show contractors their pricing item by item, compared with their competitors in an anonymous fashion. This has empowered contractors to understand their competitive position, and in many cases offer better deals.”

I'm reminded of the post from a couple of days ago: Published benchmark costs bring procurement savings.

In the article in chief above, criticism of government procurement uniformly complained that the government did not achieve the market-leveraged savings of private business. Private business, of course, is not burdened with the many so-called "wealth distribution" programs (see, here) of the federal government, such as Buy American. And, WalMart acquires large parts of its product in China and other non-US production centers. Do we want our government to do likewise? We could do it.

America made a great leap forward economically at the start of the 20th century by dismantling the monopoly "trusts", a form of forced "creative destruction" of concentrated capital. The lesson learned is that too much concentrated market power is not good for the larger society or economy.

So, what is a Monopsony? According to Investopedia:

Definition of 'Monopsony': A market similar to a monopoly except that a large buyer not seller controls a large proportion of the market and drives the prices down. Sometimes referred to as the buyer's monopoly.

Investopedia explains 'Monopsony': People have accused Ernest and Julio Gallo (the big wine makers) of being a monopsony. They had such power buying grapes from growers, that sellers had no choice but to agree to their terms.

“The rule is, jam to-morrow and jam yesterday--but never jam to-day.'


'It MUST come sometimes to "jam to-day,"' Alice objected.


'No, it can't,' said the Queen. '

It's jam every OTHER day: to-day isn't any OTHER day, you know.'


'I don't understand you,' said Alice. 'It's dreadfully confusing!'


'That's the effect of living backwards,' the Queen said kindly: 'it always makes one a little giddy at first--'


'Living backwards!' Alice repeated in great astonishment. 'I never heard of such a thing!'


'--but there's one great advantage in it, that one's memory works both ways.'


‘I'm sure MINE only works one way,' Alice remarked. 'I can't remember things before they happen.'


'It's a poor sort of memory that only works backwards,' the Queen remarked.”

― Lewis Carroll, Through the Looking-Glass, and What Alice Found There

http://www.goodreads.com/work/quotes/17240250-through-the-looking-glass-and-what-alice-found-there

A penny saved is a penny earned

Benjamin Franklin is credited with the saying in the title to this post. He's also quoted in the following story, but I hadn't heard this one before. Loose lips, yes, but small leaks?

UK public procurement most expensive in EU

"Beware of little expenses. A small leak will sink a big ship." The words of Benjamin Franklin, one of the founding fathers of the United States, are as relevant today as they were in the 18th century. In fact, they are eerily true when considered in the context of government procurement.

Public sector procurement in the United Kingdom is certainly a big ship. It accounts for some £230bn of public funds each year. And as for the leaks? Fresh research released by the Centre for Economics and Business Research has found that the UK has the most expensive public procurement processes in the European Union. The cost to a public sector body to attract a bid from a potential supplier in a competitive process is £1,260.

This leads to the question of why the UK is such an expensive place to conduct procurement processes.

Combined with high labour costs, the length of a typical competitive process plays a critical role in increasing the cost of public procurement on both the buy-side and sell-side. The public sector purchasing process was found to be 53 days longer than the EU average.

Higher costs are obviously bad news for government departments that are fighting budget cuts, but the high cost of procurement also has more indirect negative effects. Expensive processes create barriers to entry and dissuade firms from taking part. The net result is that fewer firms submit tenders, reducing choice and competition, and therefore value, for public sector organisations looking to award contracts.

But all of this is about to change. In 2016 the European Commission's ruling mandating e-procurement for all European public sector organisations will come into force. The savings are predicted to be substantial: in the region of £30bn according to some estimates. These cost reductions will come in part from better management of costs and improved spend analysis enabled by e-procurement. But as well as cost savings, the widespread introduction of e-procurement will bring benefits such as greater transparency, a reduction in procurement fraud, plus faster and more cost-effective purchasing and bidding processes.

The UK public sector already has e-procurement frameworks, such as CloudStore, which private sector companies are compelled to join to ease the process of selling to public sector organisations. However, some firms feel the accreditation process for joining is still too stringent to justify the allocation of limited resources. For e-procurement to enable greater competition and lower costs for buyers and sellers, these barriers need to be removed. If the government can make best use of these new platforms, it could soon be plain sailing for public and private procurement.

Read more: http://www.publicserviceeurope.com/article/3755/uk-public-procurement-most-expensive-in-eu#ixzz2Z6wrvhSH

We'll see, and hope for the best.