Privatizing Essential Government Services in the age of Covid

The Washington Post ran this story today. I'm excerpting for teasers. Read the article at the link provided.

How the U.S. vaccination drive came to rely on an army of consultants 

Private contractors cost taxpayers millions while demonstrating few clear results and papering over weaknesses in the country’s public health system

When Gavin Newsom outsourced key components of California’s vaccine rollout to the private sector during the pandemic’s darkest days last winter, the Democratic governor promised the changes would benefit the most vulnerable.  His “number one” reason for handing the reins to Blue Shield of California, an Oakland-based health insurance company, was “equity” — delivering vaccine doses to those at greatest risk, many in communities of color, he said in February.

But the $15 million contract with Blue Shield, plus another $13 million for McKinsey, did not deliver on that promise, according to state and county officials, as well as public health experts.

California wasn’t alone in using private contractors to manage the vaccination campaign. At least 25 states, along with federal agencies and many cities and counties, hired consulting firms, according to a Washington Post tally. The American vaccination drive came to rely on global behemoths such as McKinsey and Boston Consulting Group (BCG), with downsized state and local health departments and even federal health agencies relying on the private sector to make vaccines available to their citizens, according to hundreds of pages of contract documents, emails and text messages obtained through public records requests.

McKinsey’s role extended beyond California to other states, including Ohio and New Jersey. Deloitte worked in 10 states. BCG received millions of dollars from the federal government to coordinate vaccine planning, while at least 11 states also worked with the company, in some cases paying it to address gaps in federal planning.

Consultants say they helped save lives by supporting overextended public servants with specialized expertise. “Our work helped state decision-makers quickly size up key factors impacting the effective distribution of vaccines,” said McKinsey spokesman Neil Grace. “All our work was based on state-defined priorities, and the data we analyzed was provided by state and local public health authorities.”

Complicating matters, some contractors contributed to the political campaigns and projects of elected officials who then became clients, prompting allegations of favoritism. Such questions have surrounded the no-bid contract Newsom gave to Blue Shield, which helped finance his political campaigns and signature housing initiative. 

 By farming out vital health services, from disease surveillance to contact tracing to vaccine distribution, state and local governments have eroded their own capacity, experts argue, making Americans more reliant on private companies to safeguard their health. The weaknesses are all the more glaring with the delta variant’s devastating march through the United States, enabled partly by insufficient penetration of vaccines.  

President Biden insisted there was “no plan to vaccinate most of the country” when he took office in January. Yet there was a plan, or at least the promise of one, and it relied on Boston Consulting Group. For $4.9 million, the Centers for Disease Control and Prevention made BCG responsible for “driving planning for vaccine distribution and administration,” according to a contract with the firm signed in September 2020 and extended this March for another $4.7 million. 

The contract called for the creation of a “robust central infrastructure” supported by “accountability mechanisms” to coordinate federal, state and commercial immunization plans.  A CDC spokeswoman, Kristen Nordlund, compared BCG to a “counselor in that they have been integral in listening to the needs of the states and helping distill that down so CDC can take action.” The firm’s services focused on data analysis and program management, BCG spokeswoman Nidhi Sinha said in an email.

 But some of the consultants lacked expertise in logistics and immunization. Instead of the “targeted program management support” promised in the contract, consultants often performed rudimentary services, such as taking notes during calls between states and the CDC, and then organizing that information in PowerPoint slides for presentations, agency officials said.  Sinha disputed that characterization, saying the CDC project was co-led by an expert with a PhD in infectious-disease epidemiology and an emergency medicine physician. 

No state went as far as California in handing over the reins to contractors — putting Blue Shield in charge of the network of providers administering shots, with assistance from Kaiser Permanente and McKinsey.

Inside the state’s public health department, some officials first learned these duties were being outsourced when they were instructed to transmit vaccine allocation data to McKinsey consultants, according to a state health official. “We were just told today about this, but have no details about how it’s going to work,” the official told The Post in late January.

Michael Condrin, chief operating officer for ambulatory care at the University of California at Davis, could not fathom why an insurance company was selected. “Blue Shield?” he wrote to colleagues. “They needed to pick Fed Ex, UPS, or Amazon.” Ann Boynton, a former state official who managed California’s nearly $10 billion health benefits program for public employees and now serves as a top administrator at UC Davis, agreed, noting of Blue Shield, “they’re not experts in distribution and delivery.”

Details of the contract also shocked UC San Diego Health’s associate chief medical officer, Chris Longhurst, who said the health center had managed to run the state’s first mega-site without support from the insurer or from McKinsey.  “Glad they all got a state bailout,” he wrote in an email to colleagues.

It's an eye-opening article, but contested.  Fortunately for the states, it seems that Uncle Sam may have picked up a lot of the bill for those contracts.

 

 

 

The business of government

I've taken the following article and sliced and diced it to my own editorial fancy, to make particular points about procurement, as is my wont in this blawg. So, if you really want to know the article's author's intent, read it at the title link.

Go on. Click the link and read it from the horse's mouth; some may view it as thought provoking. I did.  My convoluted version follows the link and hopefully does not too much damage to the author's intent.  Pay attention to my identified tags/labels (in the head of this blawg) to put this post in my context.

Thinking about the business of government, By CHRIS DISHMAN, a Ph.D. candidate in public affairs at the University of Texas at Dallas, who wrote it for the Dallas Morning News.

Total spending for the executive branch, known as “discretionary funding,” amounts to 30 percent of all U.S. spending. “Mandatory spending” accounted for 70 percent of total government spending in 2016.

The Department of Defense accounts for half of “discretionary” spending, so agencies like Commerce, Energy, Homeland Security and Veterans Affairs make up 15 percent of total spending. If Congress eliminated the Department of Energy, for instance, the government would save $28 billion annually, which is roughly equivalent to the cost of two new CVN-class aircraft carriers.

Medicare, Medicaid, Social Security and interest on the debt make up the bulk of “mandatory” spending, together with other “entitlements”, social as well as corporate.

The executive branch is the same size as it was in the 1970s, despite the increasing number of laws and regulations passed by Congress. The government remains at 2.1 million people or less.

The government’s workload has skyrocketed, as measured by the amount of spending per government employee, yet neither Congress nor any executive will support additional resources to implement the rules and regulations they advocate. The result of this dilemma is that government contracts out many of its duties to the private sector. And this forces government managers to shift existing resources — those used to undertake other governmental duties — to “manage” those contracts.

The government is paying big dollars to companies to undertake governmental missions. Why? Because it is politically palatable. Mandatory spending must be addressed to balance the budget, but politicians know that threatening a reduction in these programs is electoral suicide. Do you wonder why lobbyists like this approach?

There are fundamental differences between business and government.

Constitutional values, not corporate law and profit, guide the public sector. Ideally, government serves public interests while protecting the competing values that underpin those interests.

The private sector, in contrast, is governed by corporate law and profit, and business executives are, in the main, disinterested in anyone who cannot support that goal.

These differences do not mean that government cannot learn from the private sector. But we should remember that the republic’s founders intended the structure and processes of government to reflect constitutional values, not those of free enterprise.

Outsourcing pre-judicial review of administrative processing

The following article, and the case which it reports, is not exactly about procurement. It does, though, inform the discussion about how to determine which activities of a government are legislatively determined to be governmental functions that must be performed by the government. The function in controversy here is the initial review of a contested parking ticket.

The article bringing this to light was flagged by the State Bar of California's Daily News Digest August 12, 2016, and appeared on NBC Los Angeles News online.

City of Los Angeles Ordered to Change Parking Ticket Dispute Process

The California Court of Appeal has ordered the City of Los Angeles to change the way it handles parking ticket disputes. A three-judge panel said the city can no longer outsource the handling of the initial reviews of parking tickets requested by motorists, but must do those reviews themselves. The appeals court’s decision, handed down this week, says the state vehicle code requires cities, not outside contractors, to conduct all initial reviews of parking tickets.

The case is Weiss v. City of Los Angeles. Pieces of the case reflected below are my own editorializing, and cut, rearranged, left out, paraphrased and otherwise altered and (mis)construed, as is my practice in this blawg. Thus, you are better served by reading the case in its entirely at the link.

In this appeal by the City of Los Angeles (City) and Xerox Business Services, Inc. (Xerox,) we consider whether the City, as the “issuing agency” for notice of parking violations in the City, must conduct the “initial review” of challenged citations, or whether it may delegate that duty to Xerox, its “processing agency”. [The decision in the case required interpretation of the complex statutory scheme, which had evolved over time. As is the case with many such statutory evolutions, some genes change, some stay the same and some just disappear, making the interpretation process more complex than a simple reading of a single statute might suggest.]

Weiss got a parking ticket, which he contested. After an initial review performed by Xerox, Weiss received a letter advising him that an initial review had been performed and the citation would not be cancelled. [There followed a round-about means of getting the issue before the court, interesting for those studying writs of mandate, standing and the like, but not germane to this post, which is more about the question, how to determine if a particular governmental function can to delegated to a private contractor. Thus, I limit the discussion here to:"Weiss’ claim that the initial review process, as currently constituted, did not comply with the statutory obligations of the initial review under the Vehicle Code".] Since 1985, the City has contracted with Xerox to act as its processing agency. As part of Xerox’s processing duties, the City delegates the duty to conduct the initial review of contested citations. Xerox is paid based on the number of parking citations processed per month, but does not receive additional compensation to conduct initial reviews. Xerox performs the initial reviews through its Parking Violations Bureau (Bureau), which is staffed by a subcontractor. In fiscal year 2013, Xerox conducted 135,291 initial reviews [constituting about 5% of citations processed].

The initial review is conducted by Bureau clerks, who must adhere to 46 Business Processing Rules (BPR), drafted by the City (or by Xerox and approved by the City). When considering a contested citation, the Bureau clerk refers to the applicable BPR, if any; if that BPR permits dismissal of a citation, the clerk dismisses it. If no BPR addresses the particular challenge, but a motorist has presented sufficient evidence to overcome a citation, clerks are instructed to refer the matter to a supervisor for a decision. The motorist learns the result of the initial review through one of 97 form letters drafted and approved by the City, on City letterhead, sent to the motorist by Xerox.

The trial court below concluded that, setting aside the issue whether Xerox was authorized to conduct the initial review, the City’s system of initial review complied with the Vehicle Code requirements in the scope of the review, in the fairness of its procedure to the motorist, and in the fairness of its substantive decision-making process.

The question at issue in this appeal [and this post] is whether the state vehicle code requires that the City, as the issuing agency, conduct the initial review, rather than its processing agency, Xerox. In its ruling, the court below reviewed the statutory framework, its legislative history (including pertinent existing, amended and repealed Vehicle Code sections), and case law. Conceding that the question was close, the court concluded that legislative changes in 1995 to the statutory scheme reflected the Legislature’s intent to place a nondelegable duty to perform the initial review on the City, the public agency that issues parking citations.

The 1993 revision maintained the prior definition of a “processing agency”; ‘processing agency’ means the contracting party responsible for the processing of the notices of parking violations and notices of delinquent parking violations. It also contained an amended version of section 40200.5, which preserved the issuing agency’s authority to contract with a processing agency (“an issuing agency may elect to contract with the county, with a private vendor, or [others] . . . for the processing of notices of parking violations and notices of delinquent parking violations....

Prior to the 1995 revisions, the legislation allowed an issuing agency to contract with a processing agency for the processing of notices of parking violations, including investigating the circumstances of the citation and conducting the initial review as well as giving the processing agency the authority to make the decision whether to cancel the citation.

The 1995 revisions repealed the previous statutes which had expressly provided that the processing agency may conduct initial reviews, and gave the processing agency the authority to investigate challenged citations. It enacted a new provisions assigning responsibility for conducting the initial review to the “issuing agency,” giving that agency the authority to determine whether to cancel the citation, and requiring it to inform the processing agency of its decision, further eliminating any reference to the authority of the “processing agency” to conduct the initial review.

Legislative deletion of an express statutory provision “‘is presumed to effect a substantial change in the law’ [citation].” (Barajas v. City of Anaheim (1993) 15 Cal.App.4th 1808, 1814.) Considered in their entirety, the 1995 changes strongly suggest that by repealing section 40200.7 and former section 40215, and replacing them with a new section 40215, the Legislature intended to give sole authority to conduct the initial review to the issuing agency, and to preclude delegation of that duty to the processing agency. No other rational explanation comports with the breadth of the modifications eliminating references to the processing agency’s authority.

But, the 1995 revisions did not amend section 40200.5 to directly reflect the elimination of the processing agency’s authority to conduct the initial review. Thus it remains that the issuing agency could contract with a processing agency “for the processing of notices of parking violations and notices of delinquent parking violations, prior to filing with the court...." This might be read in isolation, without considering the 1995 changes, as suggesting that the issuing agency may contract with the processing agency to conduct the initial review because that review occurs before the judicial review.

However, given the history of the relevant statutes as we have traced them, it is unreasonable to assume that by failing to amend section 40200.5, the Legislature intended to retain the authority of the processing agency to conduct the initial review and undo the changes it so clearly made in the 1995 amendments.

The 1995 changes deleting any reference to the processing agency’s authority to conduct the initial review, compel the conclusion that the issuing agency (here, the City) must conduct the initial review, and cannot delegate that duty by contract to the processing agency (here, Xerox).

There are, at least, a couple of procurement questions that jumped out at me from the case. First, recall that Since 1985, the City has contracted with Xerox to act as its processing agency, and is paid based on the number of parking citations processed per month, but does not receive additional compensation to conduct initial reviews. I cannot believe that if another contractor held the contract for processing parking citations, that Xerox (or any other contractor) would conduct the initial reviews "for free", recalling again there were 135,291 such initial reviews conducted in 2013. I wonder what the cost of doing that "free" work would be if contracted out to another party, and if that "free" work is actually paid by inflated prices or costs in the "processing" portion of the work.

Second there is an aspect of Guam Procurement Ethics law that stands out. This "free work" is given as part and parcel of getting actual paid work. It is not a gratuity as typically defined because there is nothing paid to a particular person, and no particular person is benefited. But under Guam Procurement Ethics law (5 GCA § 5630(d)):

It shall be a breach of ethical standards for any person who is or may become a contractor ... to offer, give or agree to give any employee or agent of the Territory or for any employee or agent of the Territory to solicit or accept from any such person or entity or agent thereof, a favor or gratuity on behalf of the Territory whether or not such favor or gratuity may be considered a reimbursable expense of the Territory, during the pendency of any matter related to procurement, including contract performance warranty periods.

For purposes of this Section, a favor is anything, including raffle tickets, of more than deminimus value and whether intended for the personal enjoyment of the receiver or for the department or organization in which they are employed or for any person, association, club or organization associated therewith or sponsored thereby.

Guam legislators are (most of the time, on whole) sensitive to "buy in" and bundling and other evils that diminish competition and stain the integrity of the procurement system and undermine the peoples' trust in government.

Stepping back from the trees to view the forest

I have to be guilty of coming into the world of procurement with a bit of anti-corruption fervor. One's first dealing with such a mysterious scheme can produce paranoia, seeing evil in the many shadows kept from the light. Transparency becomes a cure-all.

Hopefully, my continued interests have moved beyond that initial perspective. A corruption-free procurement system is a necessary, but not sufficient, condition to enjoy an effective procurement regime for good governance. 

Good governance is concerned with "the creation of a shared sense of “us,” an imagined community on whose behalf the state acts" (as suggested by a quote from below), as envisioned, for instance, in the US Declaration of Independence, which concretely created a coalition of declared independent colonies, and its Constitution, which concretely created a new nation.  Good governance is most concerned with creating and maintaining a state that continues to provide peaceful prosperity for the community.

But good governance also requires maintaining that shared sense, not an easy task when competing interest groups bay for priority.  

As we look at the inevitable "problems" and imbalances in the procurement regime, as well as proposed "solutions" to the problems, we need to be ever mindful of which interests, political and private, contributed to the problem in the first place, and what interests benefit, or suffer, as a result of the problem and proposed solutions.  

We need to stay focused on good governance for all of us.  Not each of us, but for the whole and wholesomeness of the community on whose behalf an effective state acts.

The following articles are not all directly related to these comments but do suggest we need to step back from a close-up view of procurement problems from time to time, to observe the larger picture. (Again, read the articles in full at the links: I make no claim to representing them fully, accurately or as intended by the author, however much I may desire to keep faith with the essential message inferred.)

1/2 TRILLION spent on IT upgrades, but IRS, Feds still use DOS, Windows 97

President Obama's team has spent more than a half trillion dollars on information technology but some departments, notably the IRS, still run on DOS and Windows 97, which isn't serviced anymore by Microsoft, according to House chairman.

"Since President Obama has taken office, the federal government has spent in excess of $525 billion dollars on IT. And it doesn't work," said Rep. Jason Chaffetz, chairman of the House Oversight and Government Reform Committee. [That statement may be accurate as far as it goes, but to be fair I believe Windows 97 and DOS were introduced at least a decade before he took office.]

He said his committee is planning a deep probe into IT spending and why so many systems are still not updated.

"It's not the biggest, sexiest headline, but I don't know how you can spend a half trillion dollars and literally have" departments on out-of-date operating systems, he told Ripon according to a transcript and video provided to Secrets.

"The IRS still uses the DOS operating system. You have a Patent office that just got Windows 97. They don't even service Windows 97 anymore.  And yet they just got it.  So the procurement process is really, really broken in this regard," he added.

"I do appreciate the president's initial appointment of Beth Cobert as the acting director. She has 15 or so years at McKinsey & Co. and Nokia.  She's a much more serious player. Unfortunately, the president had put in someone in Katherine Archuleta, who was his political director on Obama for President.  She had absolutely no business running what is really the largest human resources operation on the face of the planet.  She had no technical background whatsoever, no experience dealing with these major computer issues," he said.

Cutting Troops But Letting the Civilian Army Swell

On July 9 the Army announced that 40,000 soldiers will be cut from active duty—some involuntarily. This comes on top of the 80,000 soldiers already let go since the Iraq and Afghanistan buildup. At a time of increasing global tension, the American military is smaller than it was before 9/11 at the nadir of the Clinton “peace dividend” drawdown.

Yet even as the military shrinks and readiness wanes, the Pentagon’s two civilian workforces—government employees and federal contractors—remain disproportionately large. Since 2010, the Pentagon’s civilian staff has grown 6%, to 744,000. Contractors: up 20%, to 730,000. Active duty military personnel, who number 1.36 million, are now outnumbered by the civilians supporting them—a historic shift.

The Pentagon’s purchasing power is staggering, and it now buys more services than hardware. Many tasks are contracted out, from basic IT and food service to bomber maintenance and logistics support. In 2010 the Pentagon spent $205 billion on equipment and $134 billion on services. By 2014 that relationship flipped, with $161 billion to services and $143 billion to weapons systems. This doesn’t include spending on services that are classified.

Everyone knows about cost overruns and schedule slips with the military’s flagship weapons programs, from the F-35 Joint Strike Fighter to the Navy’s newest all-electric aircraft carrier. But other bureaucratic missteps fly under the radar. Failures in IT acquisition akin to Healthcare.gov occur regularly in Pentagon service programs.

Because the Pentagon cannot adequately manage this unaccountable army of contractors, it ends up shortchanging the military, which is starting to lose critical staff, notably mid-grade field officers and senior noncommissioned officers.

Congressional and Pentagon leaders must impose oversight on the Pentagon’s shadow workforce. A start would be to get a handle on what contracts are in effect now. The Pentagon’s inventory of contracted services lacks a standardized classification, so it’s difficult to compare by type of service, price paid and contractor employed. With an adequate data set and support from top leaders, procurement professionals could analyze services spending, recommend better choices and avoid wasting precious defense dollars on excess or redundant services.

The arcane purchasing process is a high-profile issue inside the Beltway at the moment. This year’s National Defense Authorization Act contains more than 150 legislative provisions on acquisition reform alone—but only for weapons systems, not Pentagon services.

Fighting Corruption Won’t End Poverty

Countries are poor because governments are corrupt. And, unless they ensure that public resources are not stolen, and that public power is not used for private gain, they will remain poor, right? It certainly is tempting to believe so. Here, after all, is a narrative that neatly aligns the promise of prosperity with the struggle against injustice.

But that won’t necessarily make their countries more prosperous.

Consider the data. Probably the best measure of corruption is the World Bank’s Control of Corruption Indicator, which has been published since 1996 for over 180 countries. The CCI shows that while rich countries tend to be less corrupt than poor ones, countries that are relatively less corrupt, for their level of development, such as Ghana, Costa Rica, or Denmark, do not grow any faster than others.

Nor do countries that improve in their CCI score, such as Zambia, Macedonia, Uruguay, or New Zealand, grow faster. By contrast, the World Bank’s Government Effectiveness Indicator suggests that countries that, given their income level, have relatively effective governments or improve their performance, do tend to grow faster.

Our moral sentiments are strongly related to feelings of empathy in the face of harm and unfairness. It is easier to mobilize against injustice than for justice. We are more enthusiastic to fight the bad – say, hunger and poverty – than to fight for, say, the kind of growth and development that makes food and sustainable livelihoods plentiful. But, in the case of corruption, which is a bad that is caused by the absence of a good, attacking the bad is very different from creating the good.

Aside from prosecuting some bad apples, measures to fight corruption typically involve reforming procurement rules, public financial-management systems, and anti-corruption legislation. The underlying assumption is that the new rules, unlike the previous rules, will be enforced.

That has not been Uganda’s experience. In 2009, under pressure from the aid community, the government enacted what was billed at the time as the best anti-corruption legislation in the world; and yet all corruption indicators have continued moving south. Uganda is not an exception.

The anti-corruption agenda often ends up stimulating the creation of organizations that are more obsessed with abiding by the new and burdensome processes than they are with achieving their stated goals. As Harvard’s Lant Pritchett, Michael Woolcock, and Andrews argue, when inept organizations adopt “best practices” such as financial management systems and procurement rules, they become too distracted by decision-distorting protocols to do what they were established to do.

As Francis Fukuyama has pointed out, the development of a capable state that is accountable and ruled by law is one of the crowning achievements of human civilization. It involves the creation of a shared sense of “us,” an imagined community on whose behalf the state acts.

Some might argue that reducing corruption entails the creation of a capable state; the good is created out of the fight against the bad. The good is a capable state: a bureaucracy that can protect the country and its people, keep the peace, enforce rules and contracts, provide infrastructure and social services, regulate economic activity, credibly enter into inter-temporal obligations, and tax society to pay for it all. It is the absence of a capable state that causes corruption (the inability to prevent public officials, often in collusion with other members of society, from subverting decision-making for private gain), as well as poverty and backwardness.

This is not an easy task when societies are deeply divided by ethnicity, religion, or social status. After all, who is the state for?

What is to prevent the ethnic group currently in power from diverting resources to itself on the argument that “it’s our turn to eat?” Why shouldn’t those currently in control of the state transform it into their patrimony, as in Venezuela, where, more than two years after former President Hugo Chávez’s death, his daughters still occupy the presidential residence?

The fight against corruption mobilizes all of us because we want to do away with evil and injustice. But we should remember that casting the bad into the sea does not imply the sudden appearance on our shores of the good that we need.

Treat government business like private business: privatize it

This article (read full report at the link) begs the question: why not just privatize it and get government out of the business of selling alcohol?

Virginia General Assembly considers proposed ABC operational changes

ABC is currently a department of the Virginia state government and controls the possession, sale, transportation and delivery of alcoholic beverages within the state. The department also establishes and operates stores for the sale of distilled spirits.

Both houses of the Virginia state legislature are considering bills which would allow the Virginia Alcoholic Beverage Control to operate outside of government authority. The proposed bill would change ABC board member selection processes. For example, commissioners will now require a business degree.

Del. Dave Albo said he would like to see ABC operating more like a business. “Government agencies have to follow certain procurement rules,” he said. “It’s really hard to run a [shelf] business when you can’t go out and buy shelves when you need them. Instead it takes six months to procure [products].”

Sen. Ryan McDougle, R-Hanover, said the changes proposed in the bill would similarly allow ABC to operate like a business as opposed to a government agency. “We hope to enable ABC to do things a business would do to increase profits and have better customer service,” McDougle said. “[These changes] will enable ABC to be managed and operated more like a business instead of a strictly governmental entity.”

An independent authority could also more readily fire employees who are not performing up to standards, Albo said. “Government employees have more rights than regular employees, so it takes longer to fire under-performers,” he said.

“ABC is going to save a lot of money on procurement services,” Albo said. “They also won’t have to use the state computer system. We expect ABC to be able to raise more money by operating more efficiently, and then that money goes to the General Assembly fund.

Most states regulate alcohol sales and distribution without taking on the risk and responsibility of selling it. It's a big business, and lucrative for those who decide what to buy from whom, especially when it is operated as a monopoly.

To procure or not to procure: is that the question?

The U.S. Court of Federal Claims is a court of limited jurisdiction. It can hear some contract disputes, but not all contract disputes, for instance. If a case is brought to the court which is beyond its jurisdiction, however juicy the merits and what it may have to say about the merits, it cannot; it must dismiss the case.

Sometimes, though, the comments it makes in doing so are juicy in their own rights.

The case in this post is one of those, even though the juicy remarks may not be reported in this post.  I have presented it chopped, sliced and diced to my own ends, so do not rely on this rendition as an accurate reproduction of the case.  If you want to know what it really says, read the whole case at the link. 

And if you really want to understand the matter better, read the cases cited in this case. There have been many trying to resolve the simple question, "what is procurement?"  (And while at it, I added a word on "is procurement an inherently governmental action?" whilst reading one of the cases cited.)

In short (read the long version at the link), this is a protest about a decision of the government to use software it had developed and came to own, rather than go to the market to allow other software providers a crack at the work.

VFA, INC. v. USA, U.S. Court of Federal Claims No. 14-173C, (October 2014)

The DoD uses a particular software package in making decisions about sustainment, restoration, and modernization of its facilities. VFA owns and markets a similar software product. The Under Secretary of Defense for Acquisition, Technology, and Logistics issued a memorandum to standardize the use of the
program at all of DoD’s military installations.

VFA filed a bid protest in this Court, alleging that the DoD’s standardization decision excludes VFA and others from competing for contracts to provide facilities management software, in violation of the Competition in Contracting
Act, 10 U.S.C. § 2304 (“CICA”). Simply put, VFA contends that the DoD should be conducting competitive procurements for this software product. The Government argues that an internal standardization decision is not a “procurement” for purposes of the Court’s Tucker Act jurisdiction, and consequently VFA is not an interested party who may challenge such a decision.

In a federal agency as large as DoD, it became increasingly apparent that multiple and different facilities condition assessment tools across DoD installations generated inconsistent and incomparable data. A 2012 Senate Report noted that the DoD “does not have a set of standards or metrics that can be used to inform budget decisions and Congress on the minimal annual levels of funding required to recapitalize the physical plant at a rate that matches the design lives of facilities in the [DoD] inventory.” The report further noted, “[b]udget pressures and other priorities can result in funds appropriated for facility sustainment being used to fund other categories of base operating support. This leads to facilities that do not receive minimal levels of annual preventative maintenance, and are not modernized to current standards for safety, security, and technology.” The report concluded that, “[o]ver the long-term, underfunded maintenance on [DoD]’s facilities costs the Department more in eventual repairs and replacement.”

To address the concerns raised by the consultants and Congress, the DoD made a policy decision to standardize its facility condition assessments. As part of this policy, the DoD chose to standardize the software it developed and owns itself, which was widely used in almost all of its installations, and which had received recognition for cost savings.

The Court must determine whether a plaintiff has established subject matter jurisdiction before proceeding to review the merits of the complaint. The jurisdiction of this Court is limited and extends only as far as prescribed by statute. Where subject matter jurisdiction is challenged, the plaintiff must establish the Court’s jurisdiction by a
preponderance of the evidence. If the Court finds that it lacks subject matter jurisdiction, it must dismiss the claim.

Under the Tucker Act, this Court has “jurisdiction to render judgment on an action by an interested party objecting to . . . any alleged violation of statute or regulation in connection with a procurement or proposed procurement.” In this case, VFA has challenged the government’s actions under CICA and the FAR, but the key phrase for Tucker Act jurisdiction is that Plaintiff’s protest must be “in connection with a procurement or a proposed procurement.” Id. Since neither the Tucker Act nor CICA define the term “procurement,” the Federal Circuit has held that the term “procurement” includes “all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” See Distributed Solutions 539 F.3d at 1345-46.

While many courts have cited Distributed Solutions for the proposition that Tucker Act bid protest jurisdiction is broad, the holding remains limited by the facts of the case. Distributed Solutions involved an attempted circumvention of federal procurement law when the Government sought to acquire software for a joint program between the U.S. Agency for International Development (“USAID”) and the State Department. The Government delegated to a contractor the task of selecting private vendors to provide the software. The Government, along with the designated contractor, issued a Request for Information (“RFI”) which stated that the objective of the government’s effort was to “select and implement acquisition and assistance solutions that meet the unique functional requirements of both [USAID and the Department of State].” The RFI specifically stated that it was “for market research purposes only” and would “not result in a contract award.”

After reviewing the responses to the RFI, the Government told the vendors that it had “decided to pursue alternative courses of action.” But, the contractor then issued its own RFI, and used the responses to select the software vendors it wanted. The Government initiated a type of procurement competition without actually committing to award a contract to the best offeror, thereby circumventing applicable federal procurement laws. [NB. My take: The first RFI was used to develop the government's determination of need, an aspect of "procurement". Then, once that was done, the second RFI was used to narrow the field of competition to select the awardee.] Thus, the Federal Circuit concluded that a procurement existed and that a legally compliant competition was required.

The present case is much different in key respects. Here, the DoD never contemplated or initiated a procurement process. The Government did not issue an RFI, did not receive information from vendors, and did not plan to award any contract. From the DoD’s standpoint, it already possessed the SMS program it wanted to use, and there was no reason to acquire anything. VFA is requesting a competitive procurement in order to sell to the Government something it already possesses.

Plaintiff argues for the application of other standardization decisions where this Court has interpreted the breadth of § 1491 jurisdiction broadly. While these cases involved software standardization decisions by the Government, the Court finds that the similarities end there.

In Savantage, the Department of Homeland Security (“DHS”) conducted a solesource procurement for financial systems application software. DHS decided to standardize its software on the Oracle and SAP systems, signing a “Brand Name Justification” instead of conducting a competition. DHS then issued a solicitation for services to migrate to these systems. Plaintiff challenged the underlying standardization decision to use the software of Oracle and SAP, and this Court accepted jurisdiction of the protest. The Court found that DHS expanded its systems contracts with Oracle and
SAP without any competition for the new work. Specifically, the Court ruled that the “expansion of work fits squarely within the congressional definition of ‘procurement’ because it is an acquisition of additional property or services from Oracle and SAP.” The Court rightly held that acquiring new work from a private vendor is, by definition, a procurement action on the part of the Government.

Similarly, in Google, the Department of Interior “restricted competition exclusively to the Microsoft BPOS-Federal and the Microsoft Desktop and Service Software for messaging and collaboration solutions,” in effect standardizing on a single private vendor’s product instead of conducting a competition.

In all of these software standardization cases, the Government attempted to conduct asole-source procurement without any competition. The existence of a procurement triggered this Court’s jurisdiction.

VFA argues in the alternative that the Court should follow the reasoning of recent “insourcing” cases, positing that the DoD’s use of its own software to the exclusion of VFA and others constitutes “insourcing” and grants this Court jurisdiction. In all of the cited insourcing cases, the DoD was obligated to compare cost efficiency between civilian and contractor personnel under 10 U.S.C. § 129a (“The Secretary of Defense shall establish policies and procedures for determining the most appropriate and cost efficient mix of military, civilian, and contractor personnel to perform the mission of the Department of Defense.”).

Each of the cases involved a required cost comparison, and this fact alone distinguishes them from the present case. The fact that the DoD compared the cost of the private contractor to its own hiring of civilian personnel is a significant step in the procurement process, and one that was never taken in this case. Further, each of these cases required the hiring of civilian personnel, not just the use of existing personnel, and thus involved an acquisition process.

VFA has pointed to no regulation or guideline suggesting the DoD was under an obligation to compare the cost of the SMS to the software products offered in the commercial market. Because it was not so required, the Government did not solicit any commercial pricing proposals, did not issue an RFI, and did not conduct an internal review or comparison of products.

Allowing VFA to bring this case, where no procurement or cost comparison process was mandated or undertaken, would so broadly expand this Court’s jurisdiction as to eliminate any restrictions of the Tucker Act. Under VFA’s theory of
jurisdiction, every time the government chooses not to procure a good or service from a private contractor, and instead creates or develops something on its own, the providers of similar products and services would be able to challenge this decision, asking “why don’t you buy from us instead?” The Court is unwilling to open this “Pandora’s box.”

While reviewing the Distributed Solutions decision, I noted another twist on the question of what actions of a government are "inherently governmental" so as to not be delegatable to a non-government entity. Recall from the VFA decision the descriptions of facts in that case: "The Government delegated to a contractor the task of selecting private vendors to provide the software."

In Distributed Solutions, the Government sought

to dismiss the contractors' complaint for lack of jurisdiction, arguing that the protest was not viable, as the contractors were essentially protesting the award of subcontracts by a contractor with a federal agency, and not an award of a contract by an actual federal agency.

On appeal, the contractors contend that the trial court misinterpreted the basis for their complaint. Contrary to the focus of the trial court's analysis, the contractors are not contesting SRA's award of the subcontracts. Rather, they are contesting the government's decision to task SRA with awarding subcontracts for the purchase of software instead of procuring the software itself through a direct competitive process.

We agree, as the contractors' complaint confirms as much. For example, paragraph 8 of the complaint alleges that the government "improperly delegated an inherently governmental function." As another example, paragraph 52 of the complaint alleges that "[b]y initially soliciting information from prospective bidders, improperly inserting SRA into the procedure to do directly what the [government] could not do—select a vendor without being subject to the federal procurement laws—the [government has] attempted to circumvent the federal procurement laws and foreclose any attempt to challenge their actions."

Distributed Solutions is good authority not only for the broad, but limited, reach of the term "procurement", but also for the proposition that government contracting is an inherently governmental activity which cannot be hived off to the private sector.

Charter to avoid procurement strictures?

On Guam there has been some confusion, now evidently reconciled, whether a newly legislated charter school is bound to use the procurement law applicable to all other territory instrumentalities. That is not a unique question, as the following article reveals.

State Auditor Announces Potential Violations Of State Law In Charter School Case

(Santa Fe, NM)—Today, State Auditor Hector Balderas announced the results of a “risk review” conducted by the Office of the State Auditor (OSA) related to the financial affairs of two Albuquerque charter schools, which are state-chartered charter schools under the oversight of the New Mexico Public Education Commission (PEC) and the Public Education Department (PED). The review found potential procurement violations, conflicts of interest and increased fraud risks related to substantial payments of public funds to the private business of Dr. Scott Glasrud, who is the charter schools’ Head Administrator.

Auditor Balderas said, “We must take aggressive measures to protect the State’s significant investment in education. In light of these findings, I am recommending that the charter schools’ boards and state education oversight agencies take immediate action to increase accountability and restore public confidence in the schools’ financial operations.”

Private partners succeed where transparency fails the public

Government accused of deliberate attempt to cover up fraudulent, incompetent and embarrassing outsourcing contracts

The Government is today condemned by MPs of all parties for hiding behind a “veil of secrecy” over the award of contracts worth nearly £100 billion a year to huge private companies. Problems are particularly acute at the Department for Work and Pensions, which is on the “verge of meltdown” over the privately-run operation of welfare reforms and employment programmes, they say.

The PAC calls today for Freedom of Information legislation to be extended to cover government deals with private firms, for contractors to be obliged to “open their books up” and for the National Audit Office to be given greater authority to scrutinise contracts. It also said suppliers should be required to have policies on whistleblowing in place.

“Too often the government has used commercial confidentiality as an excuse to withhold information, often in response to Freedom of Information requests from the public or MPs,” the committee says.

Conservative and Labour governments alike have turned to private companies over the last 30 years. The Government spends around £187 billion a year on goods and services, about half of which is estimated to be spent on contracting out to private and voluntary providers. Contractors are now responsible for vast areas of public services from managing offices, providing computer equipment and paying pensions to running prisons and immigration removal schemes, assessing benefit claimants and even maintaining nuclear weapons.

Coalition ministers are stepping up the process with the part-privatisation of the probation service and by handing responsibility to welfare-to-work programme to private companies. Ministers argue that the practice saves cash for the public purse because large companies can achieve economies of scale.

In a scathing verdict on the Coalition’s drive to contract out public services, the Commons public accounts committee (PAC) accused ministers of trying to cover up mistakes by refusing to divulge details of contracts. It said the Government was failing to get best value for money and lacked the expertise to ensure “privately-owned public monopolies” provided quality services.

The committee’s chair, Margaret Hodge, said: “If it’s not sorted out it will become the biggest ad for re-nationalising public services.” Protesting that contracts were too often “shrouded in a veil of secrecy”, she claimed: “We are in danger of creating a shadow state that is neither transparent nor accountable to Parliament or the public.”

The committee demanded that contracts with private companies are put into the public arena. It said four major firms it quizzed – Atos, Capita, G4S and Serco –were prepared to agree to the move, adding that it appears that “the main barriers to greater transparency lie within Government itself”.

Mrs Hodge said: “An absence of real competition has led to the evolution of privately-owned public monopolies which have become too big to fail.

TUC’s general secretary Frances O’Grady said: “It is time to end the default assumption that anything done by the public sector is better done by private contractors.

“The truth is that there has been a growing tide of outsourcing scandals, fraud and service failure. Some of this is down to government incompetence in contracting out, but much is an inevitable result of replacing the public sector ethos with the profit motive and cost-cutting.”

MoJ singled out in damning review of government contracting

The Public Accounts Committee’s 47th report, on contracting out public services to the private sector, cites several examples of contract mishandling by the MoJ.

Noting that the Cabinet Office admits that Whitehall 'has a long way to go before it has the skills required to manage contracts properly' it comments: 'This is a concern, given the speed at which some departments - such as the MoJ - are going ahead with outsourcing, despite a poor track record.’

Probation and offender rehabilitation are two significant areas the MoJ intends to outsource in the near future.

The report says it was ‘shocking’ that it took the ministry eight years to spot overcharging by G4S and Serco for the tagging of prisoners.

It also said fines of ‘a mere £2,200’ to Capita over its inadequate supply of interpreters to the court service did ‘not come close to taking into account the cost to the criminal justice system and to individuals caused by their failure to deliver’.

The report calls for the extension of the Freedom of Information Act to include public contracts with private providers to tackle the lack of openness around government contracts.

We have to fix IT; we have no choice

I've previously mentioned that Information Technology is a problem child. But it is our problem child, and like our other children, it is our future. We have no choice; we have to fix IT. 

We have reared IT to be our gate keeper for all of our information and communication. Our future is presently reliant on a problem child that is outgrowing its clothes before we have the old ones paid off; growing so fast we don't even know what size to buy next. We have made it too big for its britches; we feed it, we are its enablers. We have allowed if not conscientiously designed IT to be a panacea, mission critical to almost every small aspect of our lives, let alone government contracting.

Tinkering with the procurement system will never work until we understand better what this child's own goals are. IT has it own dreams -- problems. The child needs more help than the nurturing procurement system can muster. I have taught my children that they can be anything they want, but the cannot be everything they want. IT wants to be everything, and we have to learn to reign IT in.

The discussions have begun, and in some places is well under way. Many more of us will have to know much much more about the problems before we can hope to find a solution. We cannot leave it to the problem child to determine our destiny.

Can IT procurement be saved?

Can the tens of thousands of people involved in government procurement — employees and contractors alike — absorb any life lessons for navigating the often bumpy road of large government IT projects? High-profile government procurement projects sometimes take a wrong turn or crash spectacularly into technological or logistical ditches. Sometimes they can be resurrected or salvaged, and sometimes they are scrapped. The smoldering remains can be attributed to the myriad miscues, oversights or missteps in a hugely complex system.

In other words, bungled launches didn't start with HealthCare.gov, and the Obama administration's Department of Health and Human Services is hardly alone in its stumbling. In 2006, the Department of Homeland Security picked Boeing to oversee its $1.9 billion program dubbed SBInet, which sought to revolutionize border security by integrating infrastructure, technology and border security agents. Unfortunately, it didn't work.

Complex federal procurement rules can contribute to the failure of advanced IT systems such as HealthCare.gov or SBInet, but Amey contends that even a wholesale overhaul of those rules probably wouldn't help much. Others say spending cuts and budget uncertainty have sped up an erosion of the federal procurement workforce. Still others blame rules they say place a crippling emphasis on getting the lowest price at the expense of what might work best.

Ultimately, said Roger Waldron, president of the Coalition for Government Procurement, successful federal contracts happen when the government understands what it wants and what it is asking of bidders, and bidders understand how to work with the government. It's not just about getting to yes — it's about getting to yes, I know exactly what I want, and here's how I want you to give it to me.

Testing, predesign decisions and planning are essential to successfully integrating legacy systems, said Jay Shah, executive vice president of Octo Consulting Group. One key, he said, is not to rush the procurement process. Budget pressures are forcing agencies with legacy systems to "think incrementally and not transformationally" when it comes to implementing new systems, he added, but agile development is not a silver bullet.

"While most government agencies love the idea of agile, the [federal] procurement process and capital planning [are] counter to what agile espouses," Shah said. Rep. Anna Eshoo (D-Calif.), who represents a swath of Silicon Valley, wants to make the system more open and accessible. "My sense is that there are inside-the-Beltway contractors that know the current system very, very well, and they are the ones that are awarded the contracts," she said.

5 areas to start IT procurement reform

“There’s a beauty and a tragedy at this critical inflection point, in regard to people and technology,” said Stan Soloway, the president of the Professional Services Council. “We have a once in a multigenerational opportunity to do this.” Few envision such a complex system will change with one sweeping gesture.

Here are five broad areas of reform experts suggest as a place to start:

1. Put someone in charge
Numerous agencies weigh in on technology procurement, but no one carefully monitors the entire process. “Part of the problem with procurement is no one is taking a holistic view with the entire supply chain,” said Clay Johnson, a former presidential innovation fellow and current chief executive officer of the Department of Better Technology. [We need an IT czar? One?]

2. Prioritize people
The federal procurement process depends on contracting officers. “The government continues to struggle mightily to attract IT talent,” PSC’s Soloway said. [Note this is an argument for bringing more IT decision making in house via people who are trained to understand the problem well enough to fashion a solution, rather than outsourcing it to purveyors of legacy based systems.]

3. [Omitted by the administrator of this blog, revealing a lack of knowledge of principles of procurement (IT maybe, procurement no), and beating an old horse rather than seizing a once in a mulitgenerational opportunity as promised.]

4. Don’t fear the woodshed
Any real reform to federal IT, experts warn, must allow for ingenuity. “These guys are scared to death because if they make a wrong decision, they are going to get taken to the woodshed,” Safavian said. “Leaders need to become better risk absorbers,” Soloway said. “You can’t have a system where everyone thinks they are going to get hammered.” [Problem children need love and discipline.]

5. Throw away the rules
A complex tangle of regulations sometimes upends its very purpose. [And here I thought they were going to mean, start with new code and open architecture.]

Have ideas on government procurement?

The Department of Finance would like your feedback to help improve communication between government and industry during the procurement process.

Lessons for Procurement from IT Vendor Management: Audits, Inputs, and Competitive Spirit

Starting with audits, Erickson-Harris suggests that vendor management organizations “incorporate the right to conduct audits to gain a first-hand look at operations periodically” in part because “showing up tells the service provider that you take the relationship seriously.” [And want to be taken to lunch.] These audit rights should include contract penalty clauses that have teeth. [Problem children respond well to standing over them with a stick and a dog with big teeth. And auditors know all about the IT you're struggling with.]

Erickson-Harris suggests: “Asking vendors what measures they can put in place to ensure quality." [We hired these guys to do it because we didn't know how. We didn't even know how to spec the contract. And we expect the contractor to tell us how to do it better in a completely disinterested way that's going to save us money? How would be know?]

Finally, keep up the competitive spirit. To wit, “keep the vendor on its toes and the situation competitive". I might suggest tempering this recommendation, after all, you don’t want to find yourself using the threat of leverage or competition with a critical supplier when the vendor knows that you don’t really have other options. [On second thought, just ask him what we need and be thankful we have him on payroll.]

Government Tech Problems: Blame The People Or The Process? [Or something else, maybe, like the underlying assumptions of need?]

What should be done about government's tech issues depends on what you see as the source of the problem. And that's where there's disagreement among the "People Who Think About Procurement More Than You And Me."

Stan Soloway heads the Professional Services Council, which represents federal contractors who are hired to build these projects. He told The Times he sees the problem as the "punishing and punitive" environment of government. "It's the human capital, the way the government buys services, the way the government determines its own requirements, the lack of collaboration within government, the lack of collaboration between the government and the private sector, the outdated systems within government," Soloway told the newspaper.

Clay Johnson, who has been fighting for procurement reform since before it became cool, takes issue with that argument. "Bad clients exist everywhere. Blaming the client is the oldest trick in the book. It's toxic." Instead, he sees the issue as being an environment that doesn't favor competition, which boosts incumbents who do mediocre or even poor work.

Determining what's at root will drive future policy decisions. President Obama has said again and again that government needs to improve the way it procures and uses technology. But so far, the White House hasn't put out any specific plans to tackle the issue.

On the legislative front, the bipartisan bill to address part of the problem — the Federal Information Technology Acquisition Reform Act (FITARA) — passed the House last June but got axed from the Senate version. That bill did not centrally take on the competitive environment, but it would have given more power to technology officers inside government so they could better project-manage the work of contractors and developers.

Obama Calls for IT Procurement Reform

Obama said, “I personally have been frustrated with the problems around the website on health care. And it’s inexcusable.”

[He then offered excuses:] The president said part of the problem was simply managing an operation as large and complex as the federal government. “What I want to just remind people of is that this government is an enormous enterprise,” he said, “and so even as sometimes we see ourselves getting stymied at the congressional level, at the administrative level, in the work that we’re doing, all kinds of changes are happening.”

CGI's Contract to Help Run Health Site Won't Be Renewed

CGI Group Inc. said federal officials won't renew its contract to oversee key parts of HealthCare.gov, the online insurance marketplace that launched with major defects on Oct. 1. The Centers for Medicare and Medicaid Services said in a statement that it chose Accenture become the lead contractor. People close to the project said they were "blindsided" when they learned of the decision Friday.

TechAmerica: Congress key to effective procurement reform

The problems afflicting federal IT acquisition system are not incurable, according to TechAmerica's newly installed Senior Vice President for Public Sector Mike Hettinger, but they could use a strong dose of legislative medicine. TechAmerica is working to foster congressional efforts to change acquisition rules beyond simple knee-jerk reactions to those particular failures. Hettinger said he is looking to educate lawmakers on the intricacies of federal IT acquisition practices and facilitate a dialogue across industry, legislative and executive branch lines. He also said the intricate nature of federal IT acquisition means only a handful of lawmakers have a full grasp of the process.  [But they likely have a better grasp of the IT acquisition process than of the IT process itself. which is a more easily exploitable weakness.]

Proposals to create a new agency that would manage large IT projects and boost the federal government's ability to hire IT specialists from private industry are steps in the right direction, he said. [Yes, revolving doors are good, for someone.]  But for effective reform, Congress must be involved, Hettinger said.

And he knows that legislative territory.

TechAmerica named Hettinger vice president of its public sector group in mid-December as the organization began a legal battle with rival Information Technology Industry after several former TechAmerica public sector executives, including former Senior Vice President for Global Public Sector Trey Hodgkins, left abruptly for jobs at ITI. TechAmerica alleges some of those former employees stole valuable membership information.

Hettinger said his new employer assured him the organization was committed to its public sector operations and that he had no reservations about taking on the new job. "The reason I'm here is because this is the premier association. TechAmerica is doing things no one else can." He also noted that TechAmerica is in the process of hiring three additional public policy group personnel in the coming weeks who will work with him. [See there? The key to problem is with Congress, not the IT industry, and all it needs is a good lobbyist or three to set things straight. Yea!]

Shhhh... IT is a procurement problem child

A Few Places Where Government Tech Procurement Works

The botched start of HealthCare.gov is just the latest big federal tech system to fail at launch. Information technology research group Standish found that during the last decade, of the large-scale federal IT projects 94 percent have been similarly unsuccessful.

Critics say the real root of government website woes is procurement, or, government's process for buying technology. So we sought out a few places where IT procurement is actually working smoothly.

Philadelphia, like the federal government, had a hard time getting innovative businesses to compete for government tech contracts. "Startups, they may have great ideas and great technology but they're not necessarily built to make it through the procurement process. Those who make it through are those who have experience working through this cumbersome process that can take a lot of time," chief digital officer Mark Headd says.

That favors large, entrenched vendors who often turn in subpar services. As the system is now, it's just not easy for young companies to find or bid on government contracts. And because all governments — federal, state and local — fear wasting taxpayer dollars on bad results — they write layers of regulations and rules around contracting. That's a turnoff for many potential bidders.

But bidding's getting easier in the City of Brotherly Love. Philadelphia leaders decided to put technology at the heart of government, hiring Headd to team up with existing tech talent in the city, and simplify bidding for government projects. To "go where the developers are," Headd created an account for the city on GitHub, a transparent code repository, and posted its open data policy there. "It's good for us, because we're gonna get more bids, it's good for [the outside developers], because it's business they might not otherwise be aware of," Headd says.

"What we've done in Kansas City is to be a little more proactive," the city's head of procurement, Cedric Rowan says. "By being willing to look at the marketplace and willing to interject into our scopes the ability for providers to give some solutions that are maybe a little more than what we're asking for but at least give them the opportunity to be innovative in their solutions back to us."

At the federal level — the Consumer Financial Protection Bureau gets praise for its approach to tech. "We wanted to show how government could work," says Merici Vinton, who served as the agency's digital lead and oversaw the launch of the CFPB's first website, which included projects like a simple complaint submission system and a redesign of mortgage disclosure forms.

Here's what Kansas City, Philadelphia and the CFPB have in common: Encouragement and cover from the top of their departments and cities; openness in sharing requirements behind IT projects from the very beginning of the procurement process; and eagerness to have smart tech people inside their departments, and to bring them together with existing government teams.

"The website and your services that you're providing to the citizens are now your storefront. So those have to be in alignment across the agency," says Vinton.

Michael Slaby — who was one of the people who built President Obama's much-lauded 2008 and 2012 campaign technology says, "the idea that things are stacked against government — the way that we procure, the way we design projects — is all true, but it's all something we have to fix. We should make it simple for technology to empower citizens to get things from their government in a way that's seamless and easy."

You may feel as I do that this article is short on detail, implying more questions than giving answers. Read the comments to it at the link above.

Why not take all of me? Here's why...

Mom told me not to put all my eggs in one basket.

Contractor’s U.S. Ties Tough to Break After Vetting Lapse

USIS has won at least $588 million under U.S. government contracts set to expire within a year, according to data compiled by Bloomberg. USIS has at least 40 federal contracts for work related to investigations, 14 of which are scheduled to expire by Oct. 1, 2014, according to federal procurement data compiled by Bloomberg. The company performs background checks and other investigative work for the Federal Bureau of Investigation, U.S. Immigration and Customs Enforcement and the Department of Agriculture, among other agencies.

The agreements include a lucrative deal with the U.S. Office of Personnel Management, which is responsible for most federal background checks. While the expiring contracts might provide agencies with opportunities to begin dropping USIS, replacing the government’s top provider of background checks might lead to more chaos in an already overburdened system.

“USIS provides the heart, the limbs and the guts of the operation for the Office of Personnel Management,” said Tiefer, now a law professor at the University of Baltimore.

The number of people with security clearances ballooned to about 5 million last year, and contract investigators have struggled to keep up with the demand for background checks, according to security specialists.

The government increasingly has relied on USIS for that vetting. Dumping a firm like USIS, a unit of Falls Church, Virginia-based Altegrity Inc. that has more than a half-billion dollars in federal contracts running out in a year, could create as many problems as it solves. It might shift a backlog of cases to two other companies, which could lead to more vetting lapses.

Shifting the load to competitors such as Arlington, Virginia-based CACI International Inc. (CACI) or KeyPoint Government Solutions Inc. -- a unit of Veritas Capital, a New York-based private-equity firm -- might worsen the situation, Tiefer said.

“There are not a lot of players in this field,” Brian Friel, a Bloomberg Industries analyst, said. “The government doesn’t have a lot of options.”

USIS’s prominence as a background-check contractor is due to its origin as the Federal Investigations Division of Office of Personnel Management. The unit, originally known as U.S. Investigations Services Inc., was privatized in 1996 as part of then-Vice President Al Gore’s effort to “reinvent” government by reducing the size of the civil service, according to a 2011 report by the Congressional Research Service.

Contracting out security reviews was designed to save the government money and offer new work for about 700 investigators no longer needed because of a declining clearance workload as the Cold War ended. Instead, demand for security clearances surged after the Sept. 11, 2001, terrorist attacks.

USIS was given a non-competitive, three-year contract for investigative work with the personnel office and granted free access to federal computer databases that weren’t available to other firms.

Since 2006, at least 20 investigators have pleaded guilty or have been convicted of falsifying background-check reports for the personnel office, according to the agency’s office of the inspector general.

Ten of those were contractors. Eight of them worked for USIS.

Surely there must be some way to generate more competition with the industry behemoths? Not all of America's innovation is limited to the IT industry, is it? There is a cost to contracting with too-big-to-flail, and it includes creating complacency as well as dependency.  And  myopia.

Noting that USIS was at one time a government agency, I am reminded of the many instances mentioned in James Nagle's A History of Government Contracting which illustrates the many times when American government has instigated industrial innovation, including the industrial revolution. He reminds us that "good enough for government work" was not originally the pejorative it now is, but indicated the gold standard of workmanship.

For another exposition of that proposition, see 'The Entrepreneurial State': Apple Didn't Build Your iPhone; Your Taxes Did, by Mariana Mazzucato, with some excerpts as follows.  

Throughout history, strategic government expenditures have played a key role in spurring economic growth. private finance is too risk-averse -- afraid -- to engage with industries characterized by high technological and market risk. The fear explains why we have seen venture capital entering, in industry after industry, only decades after the initial high risk has been absorbed by government.

Mission-oriented public investment put men on the moon, and later, lead to the invention and commercialization of the Internet, which in turn has stimulated growth in many sectors of the economy. Indeed, as I describe in the longest chapter of my book, the U.S. government has been a leading player in funding not only the Internet but all the other technologies -- GPS, touchscreen display, and the new Siri voice-activated personal assistant -- that make the iPhone, for example, a miracle of American technology.

Casting the public sector as the villain and business as savior has relieved the private sector from any obligation to increase its own commitment to the innovation process. There simply are not enough large businesses today playing the role that Xerox PARC (the Palo Alto Research Center) and AT&T (Bell Labs) played in the past.

Today's big companies, like Cisco and Pfizer, spend almost as much on share-repurchase schemes (which enrich those who own stock) as they spend on research. Interestingly, the big "repurchasers" (the biggest being in oil and pharma) often justify such buybacks with the claim that there are no other "opportunities" for their investments. But really? No opportunities in health for pharma these days? Nothing for oil companies to invest in? What about safe and clean renewable energy?

When building innovation "eco-systems," then, it is important to make sure the role of business is symbiotic, not parasitic. That means, if we want to rebalance the economy, we need to rebalance the story we tell about who the innovators really are. Interestingly, it was the venture capital lobby in the mid-1970s that pushed for the capital gains tax to fall by 50 percent (from 40 percent in 1976 to 20 percent in the mid '80s). It has been falling ever since, based on the narrative that only thus will the entrepreneurial "risk-takers' do their thing and enrich us all.

But that narrative is false. The entrepreneurial state has funded the radical innovation behind much if not most of modern economic growth. Denying government today the resources to do its thing endangers us all.

Outsourcing pendulum starting to swing back?

Analysis: Government Privatization Paves the Way for Crony Corruption By Norm Ornstein

There are good reasons why not all governmental functions can or should be done by government employees or officials. It can be more cost-effective to hire contractors instead of training government employees; contractors can have more expertise; and contractors can do many things more efficiently. Some states have privatized such things as toll roads in order to raise cash in the short run to resolve serious budget problems (in the process, of course, sacrificing long-term revenue). In other cases, such as infrastructure, public-private partnerships can be the most cost-effective and efficient way to accomplish public and private ends.

But in recent decades, the dramatic push for more and more privatization of federal functions has gone beyond a discussion or analysis about how to best sort out public and private functions, turning into a headlong rush to privatize more. A good part of this is ideological in nature—driven by vociferously antigovernment ideologues who want to squeeze the size and role of government, decapitate government-employee unions, and discredit government generally along the way. Another part is greed: Sell off parts of government, or hand out contracts, in ways that reward one’s cronies and campaign benefactors. And a third part is to hide the costs of difficult or unpopular activities such as war or spying. Mixed in with these motives is a broader, less malign one: As government has been squeezed and public employees vilified and cut back, the only feasible way to hire competent people who are needed to fill important functions is to do it through the back door.

The intelligence brouhaha and Snowden fiasco—how could this guy have been hired, given his high-level classification, paid $122,000 a year, and gain access to areas expressly off-limits for someone at his level?—should make us focus on the bigger issue, and bigger problem, here. We have vastly over-privatized, and in the process lost control over swaths of important policy areas while allowing unaccountable and even outlaw behavior to expand. There were at times more than 100,000 contractors in Iraq, including nearly 50,000 “soldiers,” many making $1,000 a day, far more than active-duty military, with the money coming from American taxpayers. Conveniently for politicians, if these “soldiers” died, they were not counted in the official death toll of Americans killed in the war.

And we have created areas where crony capitalism can meet crony government to create crony corruption that cheats all taxpayers. If multiple public functions are privatized, or partially privatized, government employees have huge incentives to curry favor with potential private employers by granting them rich contracts or consulting fees, and then subsequently getting jobs paying multiples of their government salaries—or just giving nice perks to one’s former colleagues and friends who left for the private sector. Private contractors know the game well; they can recruit top government employees and then effectively lease them back to the government, where they do the same jobs and stick taxpayers with much higher bills.

Outsourcing defense procurement: an experiment

The UK is going to conduct an experiment, of sorts, with full and serious consideration being had, if not preferred, to privatize (or outsource, take your pick) the conduct of the country's defense spend.

It is a proposition, of course, that is controversial.

This article from supplymanagement.com (which provides views inside the world of government contracting as well as private sector contracting) describes the experiment.

Defence procurement outsourcing needs more examination

The Ministry of Defence (MoD) is to carry out a year-long assessment phase before eventually deciding whether to outsource defence procurement to the private sector.

In a statement to Parliament yesterday defence secretary Philip Hammond revealed the government will invite proposals from the private sector that will detail the provider’s capability and how they would operate a ‘government-owned, contractor-operated’ (GoCo) entity. In his statement, Hammond made clear he believes the GoCo option will prove preferable. “We have made no secret of our expectation that the GoCo option is likely to prove better value for money, but we need to test this assumption with the market, to see what can be delivered and at what cost.”

In parallel, it will assess a public sector comparator, described as ‘Defence Equipment & Support plus’ to decide which option provides greater value for money. Once the assessment phase has been completed, the government will decide whether to contract one of the bidding parties or to keep the purchase of military supplies - from helmets to helicopters - within the public sector.

Some consider this the Holy Grail, as in this next opinion piece by Andrew Pringle from The Telegraph.  Andrew Pringle is president of KBR’s UK defence business.  KBR provides defence work for the UK. One is reminded of Candy Rice-Davies.

It might be noted, as does the last mentioned article below, that this is a £14bn annual procurement programme. It is big bikkies, and big business, in anyone's currency.

The Ministry of Defence can get better value from the private sector

Good equipment saves lives, while failures in supply or specification can endanger or even cost them. Those on the front line do not care how it is procured, as long as they get the right equipment, in the right place, at the right time.

Yesterday’s announcement by Philip Hammond, the Defence Secretary, that private firms will be brought into the heart of the MoD’s procurement process – with the Defence Equipment and Supply organisation (DE&S) becoming, in the jargon, a government-owned, contractor-operated entity – has attracted criticism. But having been on both sides of the divide – as a commander at every level from platoon to division, and now the president of a global leader in the delivery of defence projects – I have no doubt that commercial-sector expertise could greatly enhance the way our Forces are equipped, and provide far better value for money for the taxpayer.

Lord Browne, the Government’s lead non-executive director, argued that by adopting best practice from the private sector, the country could save between 10 and 30 per cent of that total. This must start with the ethos. From the beginning to the end of the process, everyone must focus on that fundamental business concept: time is money.

Making defence procurement faster and more cost-efficient is not “privatising” or “taking over” the Civil Service. This is a model of equal partnership. It is about loosening the bureaucratic straitjacket to create the freedom for the thousands of excellent civil servants who work in the DE&S to do their job better.

How will this work? First, new skills. The existing staff are drawn from the Armed Forces, mostly with a background in operations, or the Civil Service, often with a background in policy. Their ability to run increasingly challenging acquisition programmes, on a £14 billion budget, can be enhanced by introducing individuals whose sole focus in their working life has been to extract the best deals from the supply chain and force it to deliver on time and to budget. This new partnership will level that playing field, and allow the ministry to cultivate, retain and recruit the best in the market.

The second great benefit will be private expertise in large-scale programme management. Lord Browne’s recommendations are again a good starting point. Projects must be held to a high level of scrutiny before the button is pushed, and no money should be committed without an experienced project manager and team in place.

The skills needed to run such projects translate directly into what’s required at DE&S to deliver the best possible kit to our soldiers at the best possible price. That is why this new approach may well prove a model for the world.

Others are far less sanguine, as reported in the Financial Times (you will likely need to register for a free, but limited, right to view this article, but you should always check the source, especially on this blog since I often extract, cut and rearrange and paraphrase to make a teachable moment of the item).

MoD procurement reform plan gets cool industry response

Howard Wheeldon, a veteran industry analyst, said on Thursday: “I have not heard of anybody who is in favour . . . I have not heard of one [defence] company that has put its hat in the ring.

“It still must be proven beyond all reasonable doubt that this is going to provide value for money for the taxpayer and to the armed forces and some benefit for those companies the MoD procures equipment from,” he added.

Sir Brian Burridge, vice-president of ADS, the industry trade group, said: “There needs to be a proper dialogue, a proper recognition of the legitimacy of the industry’s concerns and a proper resolution of those concerns.”

These include commercial confidentiality and intellectual property issues, especially if the job of running the Goco is given to a competitor.

However, the Royal United Services Institute, one of the UK’s most influential military think-tanks, expressed stronger doubts. “We cannot easily see how the . . . Goco would even work in practice, let alone why it would be a less expensive and better alternative to what is in place today,” it said, adding that history was littered with failed outsourcing deals.

I am supportive of this kind of experimentation.  Assuming the race is a fair one (and I question whether the defects in outsourcing this complex task will show up in only the first year), we need practical studies of the effects of the choices available to get the right balance of transparency and accountability against bang for buck and efficiency appropriate for the job.

But we cannot, in my mind, abdicate due process and public interest, especially when it comes to critical government functions and services, such as the defense of the country. We could, for instance, sell advertising space on uniforms, replacing the flag of the country for, say, a golden arches patch, and that would give us bang for buck. Sports teams do that, and it is a common private sector practice. But is that commercial model one we want for our military, our public works department, our school teachers?  

I get queasy with the thought of off-loading our governmental responsibilities to and conferring our sovereign immunity on the highest bidder, even the best value bidder.