He spoke proocurement reform, but got bespoke procurement

It looked good on paper, and, of course, after the horse had bolted:

• Watchdog groups are calling on the Legislature to pass, and for Governor Cuomo to sign, comprehensive “clean contracting” legislation

In 2016, an investigation into a sprawling alleged pay-to-play scheme connected to the Governor Cuomo’s Buffalo Billion economic development program resulted in charges against nine men, including a former top aide to Cuomo, Joe Percoco, and the former president of SUNY Polytechnic Institute, Alain Kaloyeros, a close government partner of Cuomo’s, on bid-rigging, bribery, and other charges.

The organizations -- including Reinvent Albany, New York Public Interest Group, Citizens Union, League of Women Voters, Fiscal Policy Institute, Common Cause, and Citizens Budget Commission -- are also urging state leaders to reduce the potential for conflicts of interest by exploring options to limit campaign contributions from anyone seeking a state contract. Nineteen states and New York City -- but not the state -- already have these anti-pay-to-play laws in place.

“The moment of truth has arrived. State and federal prosecutors say $800 million in state economic development contracts were rigged, but so far, the Legislature and governor have yet to act,” said John Kaehny, executive director of Reinvent Albany, standing in the state Capitol. “It’s time they pass common sense legislation that includes independent oversight over state contracts, uniform contracting rules, and transparency that will prevent corruption and abuse before it happens.”

• Governor Cuomo Announces 35th Proposal of the 2017 State of the State: Restoring the Integrity and Accountability of State Government Through Comprehensive Ethics Reform

The comprehensive package of reforms includes:

Advancing a constitutional amendment limiting outside income and creating a full-time legislature;
Advancing a constitutional amendment imposing term limits for elected officials;
Requiring members of the Legislature to obtain an advisory opinion before earning outside income;
Advancing legislation to close the “LLC Loophole;”
Instituting Public Financing and enacting a number of other campaign finance reforms;
Subjecting local elected officials to financial disclosure requirements;
Promoting Increased Transparency Through Comprehensive Reforms to the State Freedom of Information Law;
Expanding the State Inspector General's authority to SUNY and CUNY not-for-profits;
Creating new Inspectors General for the Port Authority and the State Education Department; and
Ensuring greater oversight of the state's procurement process.

• Statement from Governor Andrew M. Cuomo on Proposed Ethics Reforms Scandal seldom begins with evil, but with temptation, and temptation usually begins with a lack of watchfulness. I will create and appoint separate Inspector Generals for both SUNY and CUNY. They will be charged with identifying and investigating conflicts of interest, fraud, corruption and abuse. They will review contracts and hiring for both improper and illegal actions. They will look for personal benefit to any executive or legislative employee or improper actions with a third party. They will review all campuses and all affiliated entities. The IGs will have the authority to bring any report of improper conduct directly to law enforcement.

I will also appoint a Chief Procurement Officer for the Executive branch. That person will be charged with reviewing all state contracts, with an eye towards eliminating any wrongdoing, conflicts of interest or collusion. And just so there is no confusion, I do mean all contracts. Any contract or agreement that entails the disbursement of state funds will be subject to review. Any question of collusion, political benefit or personal connections will be thoroughly examined. The Chief Procurement Officer will have investigative and prosecutorial experience, and will be authorized to refer problematic issues directly to law enforcement for further action.

Alas, "Procurement reform became a hot-button issue following the arrest of several Cuomo allies on bid-rigging charges."

The rig was up, but not that many dominoes seemed to fall.

N.Y. developer pleads guilty ahead of 'Buffalo Billion' corruption trial

Kevin Schuler, formerly an executive at Buffalo-based LPCiminelli, admitted on Friday to wire fraud and conspiracy charges before U.S. District Judge Valerie Caproni in Manhattan, less than a month before a scheduled trial. Schuler said he was involved in a bid-rigging scheme that allowed his company to win a lucrative contract as part of “Buffalo Billion,” a signature economic development project of New York Governor Andrew Cuomo to revitalize the region around Buffalo, New York.

And then: Architect of Cuomo’s Buffalo Billion Project Is Convicted in Bid-Rigging Scheme

Alain E. Kaloyeros, a principal architect of Gov. Andrew M. Cuomo’s signature economic development initiative, was convicted on Thursday in a bid-rigging scheme that steered hundreds of millions of dollars in state contracts to favored companies in Buffalo and Syracuse. Dr. Kaloyeros, 62, was found guilty of wire fraud and conspiracy in the fourth week of a federal trial in Manhattan that invited harsh scrutiny of Mr. Cuomo’s ambitious plan to revitalize upstate and western New York, known as the Buffalo Billion. Dr. Kaloyeros, the former president of SUNY Polytechnic Institute, had been credited with helping to create a high-tech industry in the capital region, which led Mr. Cuomo, a Democrat, to place him in charge of the Buffalo Billion project. The governor had praised Dr. Kaloyeros as a genius and “New York’s secret weapon.” Soon, the money began to flow to Buffalo; waterfront parks, gleaming modern factories and a cluster of medical and technology facilities were built.

Mr. Cuomo, who has not been accused by prosecutors of any wrongdoing, said after the verdict that he had “no tolerance for those who seek to defraud the system to advance their own personal interests. Anyone who has committed such an egregious act should be punished to the full extent of the law.”

But at the trial, the prosecution presented evidence that Dr. Kaloyeros and Todd R. Howe, a former lobbyist with ties to Mr. Cuomo, conspired to defraud Fort Schuyler Management Corporation, a nonprofit real estate arm of SUNY Polytechnic, by steering lucrative contracts to two firms whose executives were significant donors to Mr. Cuomo’s campaign. As part of the scheme, Dr. Kaloyeros and Mr. Howe tailored requests for proposals, or RFPs, to fit the specific qualifications possessed by the two companies — LPCiminelli, a Buffalo construction management firm, and COR Development, a Syracuse-area firm — and ensure that they be chosen by Fort Schuyler for the projects. LPCiminelli, for example, received a contract to build what became a $750 million solar-panel plant on the banks of the Buffalo River, while COR received contracts worth more than $100 million for other projects. Both firms were clients of Mr. Howe’s.

Michael C. Miller, a lawyer for Dr. Kaloyeros, said after the verdict that his client would appeal. “Alain Kaloyeros is innocent,” Mr. Miller said. “He did not rig bids. Not a penny was lost. Not a bribe was paid. He did the best job that he could for the State of New York and for Fort Schuyler, and we’re just utterly disappointed with the outcome of this case.”

Government watchdog groups said that the verdict, like dozens of previous cases touching on corruption in the state capital, was the result of a lack of strong ethics laws and enforcement.

Jury convicts Ciminelli, Kaloyeros in Buffalo Billion bid-rigging scheme

The jury obviously agreed with the government's key witness, former LPCiminelli vice president Kevin Schuler, who took a plea deal and testified against his former boss early in the trial. Prosecutors dropped their charges against former LPCiminelli executive Michael Laipple.

Schuler spelled out for the jury how he, Ciminelli and Kaloyeros conspired to make sure that LPCiminelli emerged as the winning bidder by designing the request for proposals, or RFP, to favor Ciminelli's company. "We had significant influence over the project, influence over the RFP and influence over the process that was going to select a winner," Schuler told the jury.

Most notably, potential bidders were told in 2013 that they had to have 50 years' worth of construction experience in the Buffalo area in order to qualify for the project. That prompted Schuler to show the jury a shirt, produced in 2011 celebrating LPCiminelli's 50th anniversary. "I think someone put this in to help us ... and I'd never seen a requirement like that," Schuler testified. State officials later shrank the requirement to 15 years of Buffalo experience, saying that the 50-year provision was a typographical error.

Of course, it's another election season, when procurement reform is a can to be kicked through a political goal post.  When procurement reformation is the lipstick slapped on political deformation.

As Governor Cuomo himself said in his Statement quoted above, "Democrats, Republicans, Conservatives, Liberals, Independents – no party or group is immune."

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.

Is Section 809 Panel playing for change that we don't need?

This is the second of two articles addressing the perennial changes that accompany all procurement regimes.  The first is the immediately prior post. The same rules and caveats about reading the original article apply here.


When it comes to bid protests, Section 809 panel should follow data

The Section 809 Panel, whose members were appointed by DoD and represent experts across the government contracting field, derives its name from the section in the 2016 National Defense Authorization (NDAA) that created the panel. Among the panel’s mandates is to streamline the acquisition process while protecting “the best interests of the Department of Defense.”

It is no secret that the Section 809 Panel also is looking at the bid protest system as part of its mandate. And it is also no secret that DoD takes a dim view of the current bid protest system. It is not a stretch to believe that, in DoD’s view, significant changes to protests would be in its “best interest.” That would be a mistake.

Bid protests provide a meaningful “check and balance” to help ensure the government consistently acts both in its best interests and in accordance with applicable procurement regulations. This is important to maintain the perception (and reality) that the federal contracting marketplace is characterized by open, robust competition. Without some third-party mechanism to review whether procurements are conducted reasonably and in accordance with federal procurement law, nontraditional federal contractors or established government contractors without established track records at particular agencies could come to view the federal marketplace as a de facto oligarchy of a few companies favored by specific agencies.

The promise of contractor-financed government oversight via the protest process gives companies comfort (especially when utilizing enormous and scarce resources) that their bids will be evaluated fairly and in accordance with the guidelines set forth by the agency in the solicitation. Without such a system, companies the government relies on will turn their backs on this marketplace to everyone’s detriment.

Those looking to change the system argue that protests are prolific, disruptive, and unnecessarily slow procurements. These arguments, however, have largely been debunked with the recent release of the most comprehensive study of the protest system in a generation by the RAND Corporation (through its National Defense Research Institute).

Among other things, the RAND Report found that protests are not at all prevalent when viewed against the backdrop of overall DoD procurement activity. The report found just 0.3 percent of DoD contract actions were protested, and most GAO protests are resolved in just over a month–hardly indicative of a system that causes governmentwide disruption. To make these conclusions, RAND studied 21,186 contract actions at GAO (average of 2,354 per year) and 475 cases filed at the Court of Federal Claims (average of 53 per year).

With respect to GAO, the data set (which runs from fiscal 2008 through fiscal 2016) showed that, while protests had increased, the effectiveness rate of protests (which is approximately 45 percent) remained steady throughout that time leading RAND to conclude that protesters were largely filing protests that had merit. The RAND study also found that 50 percent of protest actions at GAO are resolved within 30 days, and fully 70 percent of cases are resolved within 60 days.

Based on this data, RAND cautioned policy makers from tinkering substantively with GAO’s and COFC’s current bid protest jurisdiction, timelines and procedures.

RAND recommended against shortening GAO’s process to under the current 100 days, based on the data showing the vast majority of cases are resolved much sooner and that GAO reasonably needs additional time for more complex cases. RAND also recommended against reducing GAO’s task order jurisdiction, noting that those protests are more successful, on average, than non-task order protests.

The RAND report did make some recommendations for reform, which were closely aligned with the evidence it painstakingly collected and analyzed. For one, nearly 10 percent of protests at GAO are for procurements valued under $100,000. A streamlined protest process would benefit the quick adjudication of these protests (such, as RAND noted, a small claims-type procedure or mandatory ADR at GAO).

Second, RAND found that small businesses file more than 50 percent of protests though they account for 15-to-20 percent of contract dollars. While this may be because the average contract awarded to small businesses is smaller than large businesses, small businesses may benefit to a dedicated enhanced debriefing process and outside counsel or help from the SBA because protests where outside counsel is present and the underlying source selection record is reviewed lead to better outcomes for protesters with a higher success rate. Counsel are also bound by their ethical obligations to only file non-frivolous pleadings.

The current bid protest system plays an irreplaceable role in enhancing confidence in the integrity of federal procurement, which fosters a more robust marketplace with more participants offering greater innovation to federal agencies. The data in the RAND report shows that current jurisdiction and timelines result in effective, non-frivolous use of the bid protest mechanism by disappointed offerors without undue disruption or delay. While larger procurements are more susceptible to protest, these big dollar procurements are exactly what tax payers and policy makers should want to be the focus of the bid protest system.

Like with everything else, the Section 809 Panel’s recommendations with respect to the bid protest system should be based in fact. Thankfully, with the RAND report, the panel has those facts close at hand.

See previous post related to this topic, here.

For the times, they are a'changing -- or are they?

Here is the first of a couple of intriguing and thought-provoking current articles, each from very good sources (or so I've observed), considering aspects of the current "changes" in federal government acquisition. The second will be in the next post (see here). 

Remember, I take indecent liberty with articles advanced here, to provide context to students of local government procurement, and Guam's in particular. Thus, I slice and dice, omit great swaths of critical data, paraphrase, rearrange, and perhaps tilt to one side or the other, the original information in these articles. It is imperative that you read the articles in their original form and the authors' intent, and not rely on my iteration of them.



“Other Transaction Authorities” might seem like a risky new acquisition method, but it’s been around longer than the Federal Acquisition Regulation.

Before there was a Federal Acquisition Regulation regime describing the many procurement laws adopted at the federal level in the last three decades plus, there were “other transaction authorities,” also known by the shorthand OTAs or OTs. This contracting method, outside the usual federal process, is not widely used and even less understood. But that’s beginning to change. “Even though it’s been around for a fairly lengthy period of time, it’s just not been used very much. So, people are afraid of it because they haven’t seen how it’s worked,” Douglas Maughan, director of the Homeland Security Department's Science and Technology Directorate’s Cyber Security Division, told Nextgov.

It comes across as new and scary but is potentially a game-changing acquisition model and it is catching fire across government. After all, it has no structure, no built in roadmaps, accountability or paper trails. But, it doesn’t have to be scary and is not really all that new, if you are a big believer in getting to the future by going back before the dawn of modern procurement rules-based practices. It has roots going back to the 1950's, long before the FAR and the Competition in Contracting Act. Three decades later that same language came to be used to grant the Defense Department similar authorities. “Under these authorities, agencies may develop agreements that are not required to follow a standard format or include terms and conditions that are typically required when using traditional mechanisms,” according to a Government Accountability Office definition. In other words, OTAs rely more on principles than rules.

By 1994, that authority had been broadened beyond research to include prototyping and then updated again in 2017 to enable contracts to move into production after successful prototypes. Over that time, several departments have been granted other transaction authorities, including Defense, Energy, Health and Human Services, Homeland Security and Transportation. Under these departments, five component agencies have also been given explicit OT authority: the Federal Aviation Administration, Transportation Security Administration, National Institutes of Health, Domestic Nuclear Detection Office and Advanced Research Projects Agency-Energy, or ARPA-E.

Homeland Security’s Science and Technology Directorate awarded its first OT contract for cybersecurity in February 2016 after launching its Silicon Valley Innovation program. While the primary focus for OTs is on research and development, not all agencies are using them for that express purpose. For instance, TSA and NASA use them for other services, such as airport security, education and outreach, according to GAO.

The reluctance to use OTs is based on “fear of giving people a lot of discretion,” said Nash, the procurement law expert. “If you’re in a government agency and you’ve got an inspector general and you’ve got congressional oversight … there’s a tendency to be pretty cautious about how you do business.”

That said, “It’s the same oversight you have over any other transaction where you’re giving a company money,” Nash said. “The problem is, if you have a lot of discretion, you take away a lot of the rules, but you still have basic ethics problems. If you gave an OT to your father without telling anybody else about it, you’d have the same ethical violation you’d have with a contract or a grant.”

The other major roadblock is the fear of funding projects that don't pan out, Nash said. “People have a hard time understanding that when you fund research, over half the time you’re funding failure,” Nash said. “You do not get 100 percent payout from research; and you shouldn’t expect it.” If you were to see a 100 percent success rate in funding research, that would just mean you weren't looking far enough into the future. “There’s nothing wrong with failure,” Nash said.

Homeland Security’s Maughan agreed. “We have a lot of successes we can talk about with return on investment, but even the failures” have some return, he said. He cited a program to downsize a Defense Department radar system to fit on smaller drones used by U.S. Customs and Border Protection. The company awarded a contract ultimately failed to produce a working prototype, but everyone involved still consider it a successful venture. The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," Maughan added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

Broadening OTs beyond research seems to increase their use accordingly. GAO reports that while most agencies do fewer than 75 OT transactions a year, TSA and NASA conducted 640 and 3,220, respectively, in 2014 alone.

Many in government have been reluctant to use their OT authorities precisely because of the lack of regulations governing their use. Since the contracts exist outside of the Federal Acquisition Regulation, they can be written with far less stringent requirements. But that also means there are fewer protections along the way to avoid a catastrophic contracting failure—one that could land a government official in front of a congressional committee.

“Even though it’s not FAR-based, we still have to do procurement documentation, we have to do a source-selection plan that says what are the criteria by which we’re going to evaluate proposals. For the most part, it’s the same as a traditional FAR-based contract, it’s just that the vehicle you’re using is not a FAR-based vehicle,” Maughan said. Despite appearances, “It’s not the wild, wild west,” Maughan added. “You still have to make sure the government is making the decisions on what gets awarded. Even still, we have a contracting officer—who’s called an ‘other transaction authority officer’—so you’re still doing the same kinds of things with the contracting folks as part of the team.”

The company was able to get funding to move their research forward and CBP learned what is feasible for the size of drones they use. “They were still really happy about being part of the program,” Maughan said. “We helped them move the technology down the roadmap toward a smaller device and that will help them in some of their DOD missions.”

“I think there’s still some return on investment," he added. "Our investment was less than $400,000 with them, so I think it falls into the category of: If you’re going to fail, fail quickly."

Had the office used a traditional contracting method for this project, it likely would have taken six to 12 months just to make an award, let alone discover that the idea would not work. Under the Science and Technology Directorate's OT authority, the time from application to award can be as short as 60 to 90 days.

“It’s not a solution for every case,” Maughan said. “It’s not the answer for all things,” he added. “If you’re trying to get startups with new innovation, then an OT might be good for you as an organization. There’s a little bit of risk working with a startup company—if you’re really just looking for a solutions provider and you’re not willing to take some risk, then an OT might not be for you.”

Nash agreed and offered some advice to agencies interested in getting in on OTs. “Let’s say you find a company out there that’s never done business with the government and that has some fascinating technology. You go to them and you say, ‘How could we sponsor you to do this? And we’ll give you all the money.’ Well, they may say, ‘The only way we’ll deal with you is this, this, this and this,’” Nash said. “We’re talking about intellectual property issues; we’re talking about accounting issues. And a normal contracting office might be pretty darn uncomfortable when they hear that because that’s not their norm.”

“You’ve got accounting problems. You want to make sure the company spends the money for what you gave them the money,” which can be particularly difficult, as one advantage of an OT contract is the company does not have to abide by government accounting standards. “But you need to make sure they have some systems.

“You need to worry about intellectual property—who’s going to have rights to it. And that would mean that if they said, ‘We’ll only do it if you take zero rights,’ that would be a problem. You might do it but you certainly would know that that’s a flashpoint that you would worry about. And then, of course, you’ve got to worry about audit rights because the government always wants to be able to audit and the contractor might not want to be audited.

Additional reading for this subject: Acquisition Disruption - Innovative Concepts in Government Contracting

Excerpt:  "This term is not defined by statute or regulation; it is best defined by what it is not. An OTA is not a procurement contract, grant, or cooperative agreement. It is a different type of agreement with the government – one that is not subject to the strict regulatory regimes that characterize other types of contracting." 

In my mind, adherence to principles is absolutely necessary for a successful procurement regime, but principles are not, in themselves, sufficient, any more than rules alone are.  See, The ethics of paper work.

Procurement Controversy du jour - Australian government 'consultants'

Experts flag lack of accountability in procurement contracts

Current contract arrangements often prevent consultants from being held accountable for the advice they give to government while ambiguous reporting makes it difficult to determine the value for money of outsourced work. That’s according to the Melbourne School of Government, which has told a parliamentary committee into government procurement contract arrangements that the commercial-in-confidence privileges often attached to consultants’ work has given rise to concerns about accountability and transparency.

“This is different to advice provided by, for instance, a government department, which forms part of the public record,” the school says in its submission to the inquiry.

Last week Government News reported on calls for the Department of Finance to carry out a detailed investigation into whether there is “systematic flouting” of the procurement rules, given the high use of government contracts below $80,000, which are not required to be put to market. The Melbourne School of Government said the way in which value for money is reported by Commonwealth agencies is not specified under procurement contracts and often remains unclear. “This means it is not possible to understand the ways in which value-for-money was assessed for specific consultant engagements, and the extent to which a particular engagement did, in fact, deliver that value.”

The school also pointed out the lack of formal accreditation for becoming a consultant or professional body ensuring practitioners meet basic professional or ethical standards.

“This means that there are no generally accepted rules regarding who can legitimately call themselves a consultant,” it said.

The school also highlighted that more than two-thirds of the public service’s consulting work is completed by five organisations, four of these being the Big Four accounting firms. “It would be helpful to understand why exactly this is.”

Dean of engagement at Griffith Business School, Professor Anne Tiernan, who has been involved in several projects examining public service capability, said successive “reforms” had eroded institutional memory and capacity for long-term thinking.

KPMG, which earned $620 million in government contracts from 2012 to 2017 according to the national auditor, argued it was unrealistic to expect public service to possess in-house the myriad technical skills needed to meet rising demands. Departments and agencies required specialist skills including data and analytics, artificial intelligence and business and technology transformation, it said.

While only the primary organisation in a contract is currently reported, the consultancy argued that the reporting of subcontractors would provide an increased level of transparency, particularly for smaller enterprises working as part of a consortium. KPMG also proposed that AusTender should provide information on other companies and consultants that unsuccessfully tendered for a contract, and not just the winner, to provide “an additional level of transparency” to the procurement process.

Read more at the link.

Putting brakes on a mule. Whoa, Mule!!

US military says robotic pack mules are too noisy to use (2015)

The US military has reportedly shelved development of its robotic pack mule — the Boston Dynamics-built Legged Squad Support System or LS3. According to a report from Military.com, there are no "future experiments or upgrades planned" for the mechanical beast of burden, with the program in need of new contracts or support from senior military figures before it can be resurrected. And the reason for this parting of ways? LS3 was apparently too noisy to make a good soldier. Over the course of its development, LS3 was given updates to make it more autonomous, able to automatically follow humans and even respond to basic voice commands like "follow," "sit," and "stay." But, it seems it never really became all that quiet. In videos of the barrel-chested robot in action during military trials last summer, it sounds as loud as a sit-on lawnmower — definitely not the sort of companion you'd want bumbling alongside you on a nighttime patrol.

Army on Accelerated Path to Buy as Many as 5,700 Robotic Mules (2/9/2018)

Requirements for robotic mules go back at least to 2001 when the now canceled Future Combat Systems was conceived.An autonomous multifunctional utility logistics and equipment vehicle survived the FCS cancelation and was transferred to the follow-on Brigade Combat Team Modernization program, but that effort was eventually scrapped as well. Since then, development of robotic mules continued, with four of the vehicles reaching Afghanistan in 2012 for a battlefield assessment. The Lockheed Martin-built squad mission support system was deployed there for about five months. When the Army put out a call for robotic mules to take part in a vendor solution assessment in September and October, seven robot manufacturers were able to bring technically mature, off-the-shelf robotic mules.

After more than a decade of experimenting with robotic mules designed to take the load off overburdened foot soldiers, the service is on an accelerated path to field up to 5,700 squad multi-purpose equipment transport robotic vehicles in a winner-takes-all competition that may wrap up as early as 2019. Over the course of its development, LS3 was given updates to make it more autonomous, able to automatically follow humans and even respond to basic voice commands like "follow," "sit," and "stay." But, it seems it never really became all that quiet. In videos of the barrel-chested robot in action during military trials last summer, it sounds as loud as a sit-on lawnmower — definitely not the sort of companion you'd want bumbling alongside you on a nighttime patrol.

The program is using an “other transaction authority” contracting vehicle to rapidly transition the technology from experiments to a program of record. OTAs are normally used to bring in nontraditional contractors to make prototypes. The Army is in the middle of selecting a contractor after bringing in seven vendors with eight different vehicles in 2017 to perform operational tests. “That is significantly faster than we have been able to do previous efforts,” Maj. Gen. John George, director for force development, Army G-8, told reporters. “That is the beauty of the new OTA process. If you have a competition though OTA, you can go to procurement and turn it into a program of record,” George said. A typical program of this kind would take upwards of 10 years, he said. “The Army wants to go faster. It wants and needs to go faster,” he added.

But this is a “good news story,” he said. “We are doing that because we have learned to hack our own system” and by using the revised other transaction authority rules. “What has changed is that the transition mechanism provided in 10 USC 2371b (h), added by the 2016 NDAA, provides a greatly simplified way of transitioning the contracting. The follow-on production effort after a successful prototype OT can be executed as a production OT or awarded as a non-competitive procurement contract,” according to Richard Dunn, founder and consultant with the Strategic Institute for Innovation in Government Contracting.

Army Revamps Strategy to Acquire Robotic Mules (3/24/2017)

The Army intends to buy 20 robotic mules from manufacturers and send them out with brigades for a year-long operational test and evaluation, the service’s program manager in charge of unmanned ground systems said March 23. Bryan McVeigh, project manager for force protection, said a recent Army Requirements Oversight Council looking at the squad multipurpose equipment transport (SMET) vehicle put the breaks on the program, which was heading for fielding in the early 2020s. The council said, “Wait a minute guys, You’re laying out a standard program of record. This is taking too long. This is way too much testing. We’re not even sure this is what we want,” McVeigh said. Chief of Staff of the Army Gen. Mark Milley instructed the PEO to go back and look at the things that really matter and get rid of the rest, McVeigh said.

Earlier in the conference, a senior service official said the proposed prices they had seen for SMETs had given officials “sticker shock.” “I’m not telling you what to bid on your price. But I am telling what we think it should cost,” McVeigh said. The vehicle after it reaches its assembly point will then have to switch over to an unmanned mode. “How do I pull what seems to be mutually exclusive design characteristics together?” McVeigh asked. That will be a tough problem for the manufacturers, he acknowledged.

The Army wants two basic configurations: one similar to the vehicles that have been tested and another that will have a seat and steering wheel so it can be optionally manned, he said. The reason for the optionally manned version is one of logistics. “How do I get from an airport to an assembly area? That kind of leads me to an optionally manned solution. There are not enough prime movers to tow all the systems that are supposed to be issued to the brigade,” he said.PEO force protection will proceed with an SMET rodeo as early as August, McVeigh said at the National Defense Industrial Association’s Robotic Capabilities conference in Springfield, Virginia. How is it going to be operated? Will it use a cord, a joystick or follow soldiers using breadcrumbs? Can it be towed at 20, 30 or 50 miles per hour without flipping over? The more capability the robot makers offer, the higher the score on their evaluation, he said.

A request for information will be published “shortly,” he said. “I need your feedback to make sure what I have in mind is executable. This is absolutely critical.” He needs to know how long it will take to get a prototype built. As for delivering the models by August: “I need you to tell me if I’m on drugs,” he said. Companies participating will be reimbursed for their expenses.

There are four possible scenarios, McVeigh said. The first is that one of the manufacturers “hits it out of the park” and gives the Army exactly what it wants. He has the authority to then go into limited production with a traditional acquisition contract. Another scenario is that a couple of the models do well, but are not quite right. There would be new requirements written, some changes, and then a down-select to one vendor. The third outcome is: “Thank you all for playing. Pick up your trophies on the way out. We learned that what we were asking for isn’t in the art of the doable.” The Army would return to an engineering, manufacturing and development phase and open up the contract again. The fourth option simply is that the Army decides it doesn’t need this capability, he said.

A note to newbies to this blog: I almost always slice and dice articles, leave out critical material, paraphrase, and add comment for purposes of turning real life situations into teachable procurement examples. Do not rely on my renditions to know the full story, or intent, of the article -- read the original at the link(s) provided.

The ethics of paperwork

Illinois, USA

Note: As I so often warn, I slice and dice and paraphrase and omit articles to my end an didactic idiosyncrasies. Therefore, don't take my word for the renditions of articles here. If you need to know the actual intent and full context of the authors of articles presented in this blawg, read the source at the links.

Procurement changes welcome

Gov. Bruce Rauner signed bipartisan legislation last week that should make it easier for the state to make required purchases at lower costs for taxpayers. S.B. 8 has particularly positive ramifications for public universities throughout Illinois.

The legislation is intended to make the procurement process more efficient and transparent by undoing restrictive rules that were put into place after the scandals of the administrations of former Govs. Rod Blagojevich and George Ryan. They created bureaucratic nightmares, the undoing of which Rauner said will "make it easier for small and midsize businesses to bid on contracts." It also will make it easier for public entities to accept the lowest bid. That may seem like common sense, but in Illinois, it's revolutionary political reform.

Killeen cited several problems UI officials endured under the old rules that he expects to be addressed by the new law. He said that "our libraries will be able to purchase academic journals that are staples throughout higher education without going through unnecessary and time-consuming procurement reviews" and "will avert delays that have slowed research and frustrated top faculty, threatening to chase them and their nearly $1 billion in annual research funding to states with "less-cumbersome" procurement guidelines. "For instance, our chemistry and biology researchers will be able to order a specialized microscope that is available from just a single source without jumping through hoops to attract other vendors that don't exist," Killeen said.

The goal of limiting public corruption under the old approach was well intended. Given the criminal instincts that pervade government in this state, they can hardly be ignored. But there are limits to what bureaucratic rules can achieve in pursuit of the noble but challenging goal of legislating honesty. They can become counter-productive when they have the effect of paralyzing the process — in this case, the procurement process.

Governor Signs Procurement Reform Bill

Rauner said the bill isn’t perfect, but it will make the procurement process easier for both vendors and state agencies like universities. “And, based upon the estimates I’ve heard, this can save the university tens of millions of dollars every year.” And Rauner says the savings will be even greater for other state agencies, from Central Management Services to the state prison system. Rauner said that his administration estimated that procurement reform would, in time, save the state $250 million to $300 million a year.

“This bill will allow us to save hundreds of millions of dollars every year”, the governor said. “This is big stuff, and it’s wonderful. This is major progress for the people of Illinois.”

Prof. Jeffrey Moore, said he welcomed the measure. Moore said Illinois’ complicated procurement rules have made it difficult for researchers to obtain vital but obscure equipment and parts at good prices, because many suppliers find them too complicated to bother with. He gave the example of a researcher who was seeking a part that was made by only one small company. “And this particular company, which is a small company and doesn’t have a lot of business, but is the only maker of this research part, was not willing to learn the process of our complicated system and chose not to participate in the bidding process”, said Moore, “which meant that the researcher was not able to do the research that they needed to do, because they couldn’t get this part.”

Gov. Rauner said it’s difficult to regulate ethics, and the result is often a surplus of paperwork. He said his own administration supported a different approach.

“We’ve made an effort to try to encourage ethical behavior”, said Rauner, “and encourage good government, but try to also balance that with making government efficient and effective and transparent.”

The devil is always in the detail. There will never be a one-size-fits-all-perfectly procurement system for all time. It's a balancing process. Every procurement change involves a rebalance of crucial principles, for better or worse. You can never finally have it the way you'll always be happy with it. In other words, it's a politician's dream come true: a never-ending dream of posture and headline. As Prof. Steven Schooner of the George Washington University Law School tells us in his procurement Desiderata, the choices we make in procurement reform involve trade-offs of critical governance principles.

It is difficult to articulate objectives for a procurement system. There are many options, and most are contradictory.

Critics of the U.S. system suggest that, historically, efficiency was not a fundamental goal of the procurement process and, arguably, our system is designed to thwart efficiency. A procurement system is efficient when it spends the least amount of resources in the process of purchasing what is needed. If your buyers are overworked, however, such a system becomes more expensive, because your buyers fail to obtain the best prices. Unfortunately, the pursuit of best value typically requires greater buyer resources, from market research to negotiation.

Ultimately, each government must decide how much discretion or flexibility it wishes to delegate to its buyers. For each individual transaction, greater buyer flexibility should result in higher customer satisfaction and better value for money. For all of your transactions, taking a systemic view, broad delegations of discretion or flexibility may reduce transparency and competition. Accordingly, this discretion may entail a lack of control that may threaten public confidence in your procurement system.

No system can achieve all of these goals. Nor can a state expect that its objectives for its system will remain constant over time. Determining which goals are most important is a daunting, ever-evolving challenge.

Because no system can achieve all of the goals here (or the many not discussed), your desiderata entails important tradeoffs. There are significant transactional, economic, and social costs associated with maximizing transparency, integrity, and competition. Nonetheless, the author believes these costs are an excellent long-term investment.

Three “pillars”, in my opinion, underlie the United States procurement system: system transparency; procurement integrity; and competition. In the United States, we believe that, as a general rule, our government enjoys access to the best contractors, lowest prices, most advanced technology, favourable contract terms and conditions, and the highest quality goods and services. We think this is so because our system, for the most part, encourages participation by the widest possible pools of potential competitors; it consistently demonstrates that competitors will be impartially considered for award of our contracts; and it treats all contractors in a manner that balances appropriate risks with meaningful profit incentives and rewards.

Cooperative roofing spoofing?

Price gouging on school projects must stop by Helene Hardy Pierce. ( Helene Hardy Pierce is vice president of the board of the Coalition for Procurement Reform.)

School districts in Pennsylvania have been victims of a very expensive waste of taxpayer money for the past decade or more. This is a national problem, and it is very serious in Pennsylvania.

Certainly they can save money when they use cooperative purchasing for items like pencils and computers. But since at least 2005, our schools have lost millions of dollars when they purchased roofing through this kind of system. Like their counterparts across the commonwealth, Lancaster-area school districts have overpaid for roofing projects.

How is it that school districts have been paying twice as much they should for roofing projects?

A survey by Ducker Worldwide found that Pennsylvania schools that purchased roofs through the Association of Educational Purchasing Agencies drastically overpaid for roofing projects. According to the Ducker study, from 2005 to 2010, schools spent $100 million more than they would have spent through public competitive bidding. You can find the survey, as well as studies in other states, at bit.ly/ProcurementSurvey.

This wasted money could have purchased 33 million school lunches for low-income students, or 100,000 school computers.

Pennsylvania in not alone. These anti-competitive, wasteful practices have been uncovered in many states, including Maryland, New Jersey, California, Texas, Indiana, Massachusetts, Virginia and others.

Pennsylvania is one of 23 states that contract for roofing projects through AEPA, which funnels the projects through Tremco, a national roofing contractor. Tremco’s parent company, RPM International Inc., recently settled for $65 million a lawsuit that charged it defrauded the General Services Administration and other government entities by overcharging for roofing contracts as far back as 2002.

Separately, Slippery Rock School District brought a defective materials suit against Weather Technologies, a Tremco company that sold material to the district through AEPA cooperative purchasing.

It’s unfortunate that a process that allows the manufacturer to act as designer, contractor and installer was allowed to exist. It not only led to wasteful spending, it also disregarded quality and best practices.

Fortunately, the kind of oversight needed is being advanced in Harrisburg. Republican state Rep. Kerry Benninghoff, of Centre County, has introduced legislation in both the House and Senate to reform this process.

Once passed, it will be a new day in Pennsylvania for roofing contractors, who will compete openly and honestly for roofing projects, and our taxpayers will support fair prices for quality work.

The Coalition for Procurement Reform provides a list of audits and studies relating to cooperative procurement at this link. 

For the record, I make no endorsement of or objection to the work of the Coalition; I know nothing of them or their work and have not taken any time to review their materials. Maybe I'll get around to it some day. Maybe you might, too.

And whilst on the subject of cooperative purchasing vs procurement (aren't we?), there is a recent appellate decision which, though fairly deep in the weeds for a novice, goes to some lengths to distinguish, under federal law but using common concepts, cooperative agreements from procurement agreements.  Hymas v. US, 810 F. 3d 1312 - Court of Appeals, Federal Circuit 2016  The antagonist and loser in that case has just recently hit another roadblock before the GAO. 

End corruption; adopt the ABA Model Procurement Code

This editorial comes from The Weekly Northside Sun, in Jackson, Mississippi, USA. Of course, I slice and dice articles presented here to make instructional emphasis of procurement issues for my own didactic purposes. Read the article at its link to get the full content and expression of the author.

The time has come for procurement and bidding reform

A recent study claimed Mississippi to be the most corrupt state in the country. The Epps prison scandal is a perfect example. It all stems from Mississippi’s awful bidding and government procurement laws. They are the worst in the nation.

There is a simple solution: Do what 16 progressive states (also including America's Territory in Asia, Guam) have already done. Adopt the American Bar Association’s Model Procurement Law. We just need the political will to do it. It would transform our state from a bastion of corruption to a model of good government. Large companies would cease fearing coming to Mississippi because of our notorious home cooking.

Tupelo Rep. Jerry Turner and Columbia Sen. John Polk are taking a crack at procurement reform as respective chairmen of their chamber’s committees on accountability, efficiency and transparency. A bill is being debated in the state House and Senate that is supported by Turner and Polk. The bill is a step in the right direction, but more decisive action is needed.

Rather than tweak our jumble of existing procurement laws and their infinite loopholes, we need to start from scratch with a new board and a new law. Rather than reinvent the wheel, we need to adopt the ABA’s model procurement law, which has become a national standard for good government.

The first step is to consolidate dozens of governmental entities that currently oversee procurement and bidding. The multiple agencies and governmental units should be consolidated into a single independent agency. Turner’s bill does this in part, but it doesn’t go far enough. For instance, the revamped Public Procurement Review Board still won’t have authority to review public procurement by cities and counties, only state agencies.

Here’s the problem: If our bidding laws are hashed out by the Legislature, there will be political manipulation by contractors and their lobbyists. A better way would be to let an independent board adopt the model procurement law. Such a process would have a better chance at reducing corruption.

Let’s take the bidding laws for the Mississippi Department of Corrections. These laws are buried deep in the MDOC state code. As it turns out, unidentified legislators exempted MDOC from competitive bidding and nobody knew about it. It may have been the very legislators who pushed through the exemptions were later involved in the shady contracts.

The same is true of the Mississippi Department of Transportation, the airport authorities and dozens of other agencies. Bidding and procurement laws have been buried in the codes of these specific agencies, making it easy for manipulators to water down without anyone noticing.

A better way is to have a statewide standard for bidding and procurement. All bidding laws should be consolidated in one section of the code. The same code should apply to all agencies and governmental entities. That would make it far harder to manipulate.

Right now we have a hodge podge of agencies and regulations: The Mississippi State Personnel Board, the Personal Services Contract Review Board, the Office of Purchasing, Travel and Fleet Management, the Bureau of Building, Grounds and Real Property Management, the Mississippi State Board of Contractors, MDOT . . . just to mention a few. Each has its own rules and regulations.

Title 31 Chapter 7 of our code has bidding laws that govern cities and counties but the law is weak at best, allowing contracts to go to the “best” bid rather than the “lowest responsive bidder” as most states do.

Making matters worse, the cities and counties, unlike state agencies, have no oversight at all. The only recourse is a lawsuit in which a losing bidder must prove that they were the “best.” Tough to do given such a vague standard.

How much money is on the line? Well the total budget for the state of Mississippi, including special purpose and federal funds, is over $20 billion. Billions of these dollars are paid to private companies contracting with the government. Transparent, competitive procurement laws could save hundreds of millions in lower prices for taxpayers. Imagine how much money is wasted by our cities and counties as the politically connected get sweetheart contracts.

Then there are the exemptions: for service contracts, single-source suppliers and emergencies. There’s so much wiggle room and lack of oversight, it’s just a free for all money grab. The taxpayers lose.

Just look at the city of Jackson. The wastewater treatment sludge removal bidding process has its own unique bidding laws different from any other such laws. Why? Instead, these contracts should have to follow standard bidding practices and get approval from the procurement board. It would have saved Jackson taxpayers millions on just that one contract. It would have prevented crony contracts at inflated prices.

Time and time again, the city of Jackson issues a “Request for Proposal” instead of following a competitive sealed bidding process. The politically connected contractor gets the business in a negotiated contract instead of competitive bidding. This is going on throughout our state, inflating the cost of governmental services by hundreds of millions of dollars.

This type of crony capitalism scares off the legitimate contractors. I know a dozen excellent companies that won’t even bid in Jackson because they know it’s rigged. The Northside Sun hasn’t bid on publication of the legals for 15 years. No point. It’s rigged.

But it’s worse. Not only does this corruption cost taxpayers millions, it gives our state the reputation of corruption, scaring away excellent national companies from locating plants here.

We have got to quit running our state like a private club for the politically connected and embrace open, efficient, transparent government. Only then will we begin to make progress.

The MPC was first adopted in 1979, and its core principles and processes have remain unaltered. It has been revised once, in 2000, and its regulations amended in 2002. Since its initial promulgation, there "has been great experimentation and variation among the state and local governments in the methods by which equipment and services have been procured. The proliferation of “local content” procurement regulations has, in turn, created a multitude of arcane differences among the thousands of jurisdictions buying such equipment and services on an annual basis. The resulting trends were negative, because complex, arcane procurement rules for such acquisitions by numerous jurisdictions discouraged competition by raising the costs to companies of understanding and complying with different rules in each jurisdiction. These costs are recovered in the prices offered by a smaller pool of competitors, resulting in unnecessarily high costs to state and local governments" (See the Introduction to the 2000 ABA MPC.)

And as the Commentators to the 2000 MPC noted, "The 2000 Code revision process has shown that many of the obstacles procuring agencies and officials encounter are those that have been written into the Code by enacting jurisdictions." (§ 2-503, Commentary 1.)

I'm also a true believer in transparent, accountable, uniform procurement laws. Guam adopted its version, falling very close in line with the ABA MPC, in 1982, and I've been witness to it's lifespan. Guam's procurement has also been tinkered and played with, by both the legislature and the executive, sometimes to good effect, others not so much. But, on the whole, from its very specific fundamental principles, the "purposes and policies" of procurement through it structured if not wholly centralized architecture and administrative as well as judicial review processes, the MPC does offer a framework yielding more than usual competition, transparency and integrity.

All that said, it must be understood that no procurement regime will negate dispute nor guarantee efficient satisfaction of government needs, nor immunize the government from corruptible influences or practices. Independent auditing, robust protest procedures and public access to almost all records of procurement (as required under the MPC) have to fill in a lot of the blanks. The public must be vigilant and demanding that exceptions and exemptions are eliminated. For instance, disclosure requirements and outsourced essential government services should not get shielded by tiered layers of contracts and ownership hiding behind LLCs and corporate structures, including "non-profit" entities owned by government agencies.

As the author of the article above reminded us, "We just need the political will to do it." And, "it" is an ongoing and never ending story. Unfortunately, it's part of the dirty work of democratic structures.

Divided we fall -- the Uniformity principle

A core principle, if not a pillar, of an effective procurement system is uniformity.

This principle is illustrated in the American Bar Association's Model Procurement Code, which calls for appointment of a Chief Procurement Officer. (MPC § 2-201.) It is the duty of the CPO to "procure or supervise procurement of all supplies, services, and construction needed by the" jurisdiction, and to "ensure compliance with" the procurement law and regulations of the jurisdiction. (MPC § 2-204(3).)

The MPC Commentary explains its rationale: "State and local public procurement systems are the means through which critical and strategic services, supplies and construction are purchased to support essential public functions. To operate effectively, it is imperative in those systems that there be central leadership to provide direction and cohesion. The Code’s drafters, in creating a central procurement official, do not intend to promote the idea that the day-to-day procurement functions must be performed directly out of the central office. It is expected that the Chief Procurement Officer will freely delegate his or her authority...." (Commentary to MPC § 2-301.)


This centralized authority is expected to make sure there is a common approach, "direction and cohesion", to procurement across all divisions and departments of a jurisdiction. It is an application of the old saying, united we stand, divided we fall, to the integrity of the procurement process.

The U.S. state of Maryland is, as suggested in the following article, having trouble coming to grips with that notion.

Procurement clash may be coming

First, the good news: Gov. Larry Hogan last week created a 19-member commission to come up with ways to fix Maryland’s maddeningly inefficient system for purchasing $7 billion worth of goods and services each year.Here comes the bad news: This group may wind up trying to re-invent the wheel because state legislators appear ready to pass legislation, based on three years of study, that could dramatically change state purchasing practices.

There’s no doubt Maryland’s now-antiquated and creaky procurement system needs an overhaul. What once was a national model in the 1980s for sensible and effective state purchasing practices is now a costly embarrassment.

Comptroller Peter Franchot has been on the warpath for years complaining about this “increasingly unworkable” and “broken” purchasing system “in dire need of reform.”

Lawmakers, especially Del. Dan Morhaim of Baltimore County, have been pushing for procurement reforms, too.

So why are the executive and legislative branches unable to synchronize their reform efforts? Hogan, on his part, appears to want full credit for any changes. He’s hesitant to work with legislators and seems to have ignored the extensive work already completed on procurement reform.

here’s a lingering sense Republican Hogan wants nothing to do with anything initiated by Democratic Gov. Martin O’Malley, whom the current governor has indirectly criticized time and again while announcing his own reforms. Yet it was O’Malley who first took steps to revamp Maryland’s procurement system.

Back in 2012 O’Malley asked the Board of Public Works “to bring someone in to kick the tires” of the purchasing system. “We need to pull this apart and put it back together.” The board contracted with Treya Partners for a thorough study of Maryland’s procurement activities.

The consultant found fragmented oversight of procurement bidding and the ultimate awards, with multiple state agencies setting their own standards and procedures; conflicting and inconsistent interpretations of procurement practice; lax contract management; and poor relationships with state vendors.

Treya made 11 recommendations. After studying these proposals in 2014 and examining procurement laws in other states, the Department of Legislative Services backed many of Treya’s suggestions and added some of its own. Among the main recommendations to lawmakers: Create a Chief Procurement Officer (CPO) under the Board of Public Works and consolidate most procurement officials spread throughout state government under the CPO.

State purchasing would be centralized, uniform processes would be followed consistently and one official would be accountable for ensuring that Maryland gets the best deal and the best quality for dollars spent on services and supplies. It turns out Maryland is one of only a handful of states lacking a Chief Procurement Officer.

None of this is reflected in Hogan’s announcement. Nor is there any recognition that Democratic lawmakers are ready to turn into law many of these procurement recommendations.

Read more at the article link above.

Another call for "special" treatment

AFP upgrade needs special rules

THE ARMED FORCES of the Philippines (AFP) has asked Congress to put up specialized rules to govern defense purchases, saying that the government’s procurement laws have posed as bottlenecks to the agency’s planned upgrades. The House committee on defense and national security called for a panel inquiry for updates on the AFP program, which has been signed recently amended in 2012.

Despite an allocation of P82.48 billion for the AFP Modernization Program until 2027, artillery and vessel upgrades have been delayed as the military had to endure the regular procurement process under Republic Act (RA) 9184, a military official said. “The acquisition system has been challenged by stringent requirements of RA 9184,” AFP Deputy Chief-of-Staff for Plans Brig. Gen. Guillermo A. Molina, Jr. told lawmakers during a sunset review of the AFP modernization program at the House of Representatives. Mr. Molina said the strict guidelines set by the procurement law has weighed on the pace of AFP’s acquisition of additional firearms and defense systems.

Of 30 planned projects under RA 10349 signed nearly three years ago, only two are under implementation while 28 remain stuck under various stages of procurement, a status report presented by AFP officials yesterday showed.

Department of National Defense (DND) Assistant Secretary Patrick M. Velez appealed to Congress to look into either amending the country’s procurement law to leave room to address specific issues on defense purchases, or include a provision in the two AFP modernization bills to exempt them from the limitations of the procedure

.
AFP asks Congress to ease procurement guidelines for defense equipment

One of the changes that the AFP proposed is the extension of the 30-day period for bid submissions since it has proven to be realistic. Velez said the procurement of defense equipment usually takes a longer time since it is sourced overseas.

In addition, the preference for lowest calculated bids and local producers should be relaxed since the highly advanced systems available abroad can be tailor-fit to meet specific requirements.

Velez said it might also be better if a separate procurement entity for defense agencies or uniformed personnel services be established since the recent trend in defense procurement remove the responsibility of purchasing equipment from the armed forces.

“[That] would now result to professionalization of defense procurement and correct certain deficiencies,” he said.

Read more in each of the articles at the links.

This is a theme that pops up frequently. For example:

Special needs and higher education, and

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

Even in countries or other jurisdictions that don't seem to have a history of questionable procurements, a cry for special treatment should be treated with critical and cynical scrutiny. 

If they had their "druthers", most bureaucracies, private or public, don't want to have to account for their acquisitions or be bothered to conduct them in a fair, honest, transparent and, yes, efficient manner. That kind of scrutiny is beneath them, and they are way too important to have to answer for their actions. It's a case of a patronizing "father knows best" attitude.

When someone says, "trust me, I'm from the Government and I'm only here to help", don't fall for it lightly.  It can and does happen, but those usually are not self-proclaimed "special" cases.

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.

Special needs and higher education

I'm not quite sure what it is about public universities and their yearning freedom from a scrutable contracting regime that is good enough for the rest of tax-supported government enterprise. The prior post was about plans to exempt Illinois colleges from common procurement practices of the state. Today I read of another such move afoot in Wisconsin:

UW funding cut trimmed

Lawmakers on the powerful budget committee trimmed Gov. Scott Walker’s proposed $300 million two-year funding cut to the University of Wisconsin System and introduced significant changes to faculty tenure and shared governance that will take away some power from faculty, students and staff and give more power to campus chancellors and the UW System Board of Regents, who are appointed by Walker. The proposed changes by the Joint Finance Committee also officially put an end to Walker’s proposal, supported by top System officials, to spin the system off from state control to be operated as a public authority.

The lawmakers restored at least in part two key operating flexibilities that were included in Walker’s public authority model. They’d be exempt from state oversight on purchasing and procurement once the regents develop their own rules governing them. They’d also be exempt from state rules on building projects provided the projects are funded entirely through gifts or grants.

The first proposal reminds me of a prior post about the University of Hawaii, and the second one of a post about the University of South Carolina.

The situation in Hawaii is particularly worth recalling.

UH’s procurement privilege could release $337M, May 23, 2010

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

University officials say the exemption, effective for two years, will help the 10-campus system operate more efficiently and with greater flexibility in awarding contracts for goods and services, including construction work. The university system has pointed to the existing code, which requires larger contracts to be awarded through a competitive sealed bidding process, for tying up projects and increasing costs as a result.

“This will allow the university to get construction projects started more efficiently and at a faster pace — and it has the added benefit of saving taxpayers’ money by allowing us to take advantage of current construction costs, which are coming in 30 [percent] to 40 percent lower in some cases.”

House Bill 347, which Gov. Linda Lingle signed into law May 6 as Act 82, allows the statewide public university system to come up with its own procurement process “in lieu of” the state procurement code. This was the sixth consecutive year that UH asked lawmakers for the exemption. It previously had flexibility from 1998 through 2004.

And how did that work out for them?

UH to lose procurement exemption as bill flops Apr 27, 2012

University of Hawaii Procurement Under Fire for Wasting Millions of Dollars on Fraud and Corruption March 12th, 2013

Local construction industry leaders are questioning as the University doles out a total of $622 million in contracts including $206 million for major contracts now underway, $229 million of major projects being procured and $187 million in health, safety, code and repairs and maintenance projects.

Dennis Mitsunaga, a successful and politically connected government contractor who has worked for virtually every state agency over the last 40 years, sent shock waves through his industry when he testified at a recent Senate hearing about waste, fraud and abuse that he witnessed firsthand in the University’s procurement system. Mitsunaga, a practicing structural engineer since 1969 and a general contractor since 1971, has worked on several projects including the University of Hawaii Chemistry building, the University of Hawaii Cancer Research Center, the Rainbow Baseball Stadium, and the University of Hawaii- Hilo Housing Project, Phase 1.

He focused much of his criticism on Brian Minaai, a University administrator who has overseen the capital improvement projects for all of the campuses since March 2008. “Brian’s process for selection of non-bid contracts is highly suspect. His selection committee consists of two ‘yes men’ assistants and a third member from the department involved in the project. In essence he controls two out of the three votes he himself makes each selection. He selects only friends from a pool of hundreds of qualified architects and engineers in Honolulu. An investigation will show that the consultants he selected were very small and not the best qualified for the projects he gave them,” Mitsunaga added.

Mitsunaga, who has two companies, Mitsunaga and Associates and Mitsunaga Construction, said Minaai directed him to replace his own civil engineering company on the job with Minaai’s pick, Wesley Segawa, even though Mitsunaga and Associates had applied for and was selected for the project as the civil engineer of record. Segawa charged the University another $293,260 for the civil engineering work and Mitsunaga and Associates had to add a 10 percent coordination fee of $29,326 plus General Excise tax; boosting the cost of the project by $30,000.

Minaai also directed Mitsunaga and Associates to replace Kimura International as the environmental assessment consultant with Wilson Okamoto and directed Mitsunaga and Associates to use Palekana Permitting and Planning to do the permit and processing at a cost of $23,000. “That work is usually covered by the companies involved so the $23,000 was an additional cost, plus a 10 percent coordination fee and GE Tax,” Mitsunaga said.

On another job for the University of Hawaii Cancer Research Center in Kakaako, Palekana Permitting and Planning charged $120,000 to process the permits even though the Kakaako district is currently exempt from such permitting.

Other architects and engineers have privately confirmed Mitsunaga’s claims. One claimed on average on University construction jobs, a construction management firm will charge 10 to 28 percent of the construction contract instead of 5 to 6 percent other state agencies would allow for the same service. Similar allegations were made public when the University of Hawaii agreed to pay $2.5 million to settle a lawsuit that alleged cronyism played a role in the award of a key development contract at the $120 million Cancer Research Center of Hawaii.

The University of Hawaii received a great deal of autonomy in 1999 from Legislature, including management of its own legal affairs, tuition and salaries and contracting.

But some senators said their own investigations have shown the University administration is failing in all of these areas. In addition, students have complained about tuition skyrocketing at the school, making it unaffordable for many local residents, because tuition has been increasing by 141 percent over the last 11 years.

Senate President Donna Mercado Kim proposed several bills this session that would take some of the power away from the University administration and its president, MRC Greenwood, including procurement responsibilities, and help bring what some legislators believe is excessive spending under control. However, during two recent Senate hearings, University officials opposed the plan to transfer procurement responsibilities to the state, and maintained autonomy is necessary.

The procurement bill passed the Senate Higher Education Committee this session, but was killed by Senators,