By Stephen Barr
Wednesday, July 18, 2007

This week, every member of Congress will receive a copy of a 450-page report prepared by the Acquisition Advisory Panel. The 13-member panel, established by Congress, came up with 100 findings and 80 recommendations on how to improve the federal procurement system after hearing from 108 witnesses.

And the report doesn't address all the issues in federal procurement. That in itself is a small sign of the complexity of government contracting, which involves big bucks and big challenges for federal agencies.

Over the past six years, spending on government contracts has grown from almost $219 billion to $415 billion. A substantial part of the growth is in response to the Sept. 11, 2001, attacks and the wars in Iraq and Afghanistan.

The spending surge has changed the nature of federal operations, with agencies turning to contract employees to help accomplish goals and creating a "blended workforce" of civil servants and contractors.

It also has renewed thorny questions about what types of work should be performed only by federal employees and what types of work are suitable for contractors.

At some agencies, contractors have been hired to oversee other contractors and assist in the awarding of contracts, Sen. Joseph I. Lieberman (I-Conn.) said yesterday. "We have even heard recently of examples of contractors writing federal regulations," he said.

Lieberman chaired a hearing held by the Senate Homeland Security and Governmental Affairs Committee yesterday to learn more about the state of federal contracting from Marcia G. Madsen, the acquisition panel's chairman; David M. Walker, head of the Government Accountability Office; and Stan Z. Soloway, president of the Professional Services Council, a contractors group.

The committee also sought advice on a bill introduced by Sen. Susan Collins (R-Maine) and supported by Lieberman that would tighten some contracting rules, such as mandating competition for work orders that are not subject to competition.

Collins said the bill would curb the practice of awarding "undefinitized contracts," which are contracts missing key terms, such as price, scope or schedule. "This practice is out of control" and puts taxpayer dollars at risk of waste or mismanagement, she said.

The government has been hit with a spate of procurement problems at the Defense Department, the Coast Guard, the FBI, the Transportation Security Administration and, notably, the Department of Homeland Security in the aftermath of Hurricane Katrina.

The acquisition panel found that reliable information often was not available on key parts of the procurement system -- including data on the size, composition and skills of the federal acquisition workforce. But the panel determined that the workforce, which was downsized in the 1990s, is struggling to keep up with its workload, Madsen said.

The nature of procurement spending has tilted toward services, not products. Sixty percent of government procurement spending in recent years has gone to contracts for services, Madsen testified.

That share of spending on services, Walker said, "raises the question of what work should be performed by contractors versus government personnel." He suggested that it may be time to rethink the definition of "inherently governmental" jobs and functions, noting that agencies will refuse to turn over information to the GAO even though contractors have access to the data.

Madsen said her panel worked hard to develop data on the use of contracts that encourage competition among companies, a key element in ensuring that the government is charged fair prices.

About one-third of the government's procurement spending was awarded without competition in fiscal 2004, Madsen said. The acquisition panel, however, could not obtain reliable data on the extent of competition in interagency contracting or the use of one agency's contract by another agency to speed up a procurement.

"We fear that the amount of noncompetitive awards may be understated," Madsen said.

Large companies told the acquisition panel that successful contracting requires planning and the development of requirements in contracts that allow for monitoring of performance and results, Madsen said. Typically, she said, vice presidents and others with a stake in the contract get in the same room to hash out what their company needs. They sometimes bring in consultants to help them define contract goals.

In contrast, Madsen said, the government is usually under pressure to award a contract quickly and obligate funds to support a program or mission. The focus on speed often takes time away from detailed planning. Federal agencies, she said, "need to have a better sense of what they are buying."