The Cheapest Contract Isn’t Always the Best, Acquisition Officials Say

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Confusion over “lowest price, technically acceptable” contracts have rendered the Pentagon’s acquisition workforce “brutalized” by critics and the press who mistake shrinking defense budgets for a lack of ambition for innovation, a top acquisition official said Thursday.

Katrina McFarland, assistant Defense secretary for acquisition and past president of the Defense Acquisition University, said “Low-cost, technically acceptable is good when appropriate, but shouldn’t be used to achieve innovation.” Her “very junior-level” acquisition workforce has a learning curve when it comes to taking the next step toward value added in contracts, McFarland told several hundred industry and government executives at a conference titled “Agility, Velocity and Service Excellence” sponsored by the General Services Administration, the Homeland Security Department and the American Council for Technology-Industry Advisory Council.

Seeking industry input on how to prioritize Defense spending on weapons and information technology, McFarland gave a capsule history of how the acquisition workforce in the 1990s was cut by 20 percent to “reap the peace dividend,” and how, following the 9/11 terrorist attacks, the civilian force was then flush with money and focused more on “pushing product out the door to the warfighter. We weren’t focused on honing business skills or maintaining a good customer-provider relationship,” she said.  “We were a bad customer.”

An injection of money by Congress in 2008 allowed planners beginning in 2010 to assemble 53 experts from agencies and industry and boil down 325 proposed initiatives to 23, which eventually resulted in the Pentagon’s pair of Better Buying Power initiatives. These include rewards and incentives for the workforce, McFarland noted, including the first-ever visits to contractor sites by deputy and undersecretaries to explain “from the horse’s mouth” the distinctions between low-cost contracts, value-added innovations and affordability in the context of the long-term costs of ownership of a system. “Instead of beating the workforce about the ears, it is a guide to help you think,” she said. If the workforce doesn’t understand low-cost technically acceptable, it will fumble around a bit,” she added, telling the business representatives, “if [acquisition] people ask questions and say this is not logical, do not stop them,” for this is how risks are taken that succeed.

McFarland’s work improving the acquisition workforce at the Defense Acquisition University drew praise from Office of Management and Budget officials who were the luncheon speakers at a conference that also addressed the government’s push toward data transparency, strategic sourcing and shared agency services. Lesley Field, deputy administrator of the Office of Federal Procurement Policy, said achieving both efficiency and effectiveness in acquisition depends on “asking all agencies to contribute, to get the right people in the room, some of whom have already come up with solutions, and then using a common platform so we don’t reinvent the wheel.”

Field reviewed the management agenda presented this month in President Obama’s fiscal 2015 budget, saying the priority goals and cross-agency priority goals were picked for “tangible positive impact, measurable results and driving lasting change.” The administration, she said, is taking the strategic sourcing of commodities “to the next level, with more standardization and more visible pricing” through an upcoming portal. She also called for additional training in IT procurement, with the possibility of creating a new career track for contracting officers in IT purchasing.

Lisa Schlosser, deputy associate administrator in OMB’s Office of E-Government and Information Technology, said IT is increasingly blending with general agency program issues, noting that her office communicates regularly with Field’s Office of Federal Procurement Policy. Her past work as an agency chief information officer, Schlosser said, taught her the value of regular informal Monday morning meetings between the CIO, chief financial officer, acquisition officer and chief human capital officer, to avoid “catching anyone off guard” as the agency focuses on “how to improve delivery, draw in the best talent and work with the private sector for people with the right qualifications.” Having devoted the past year to determining best practices for purchasing IT in modular and Web-based units, she said, her team is now focusing on the “highest impact investments” for improving agency acquisitions, “especially in citizen-facing tools,” for which the government is learning from eBay and Amazon.com.

The goal of the conference, said Nick Nyack, Homeland Security’s chief procurement officer, “is to get the good news out. We spend $18 billion a year and do 100,000 buying transactions. We don’t want to be defined by the one or two that were problems.”

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