Defense aims to use interagency contracts judiciously

The Defense Department will encourage its contracting officers to use the General Services Administration's Multiple Awards Schedule if GSA can justify that the value of the services provided is commensurate with their price, the Pentagon's top career procurement policy official told an industry association on Wednesday.

Shay Assad, director of defense procurement and acquisition policy, told members of the Coalition for Government Procurement that Defense is embarking on a renewed effort to maximize the value of its buying power, including more strategic use of interagency contracts.

"The message we are giving to our interagency partners is, 'Where do you provide the value?' " Assad said. "If you provide the value and expertise in certain areas and we can see it, we are going to come to you."

In recent years, interagency contracts have proliferated governmentwide, including at Defense service agencies. The rapid growth of interagency vehicles has caused significant consternation at GSA because it creates more competition for business.

Last week, the procurement coalition wrote Defense Secretary Robert Gates expressing concern about duplicative indefinite delivery-indefinite quantity contracts at the department, particularly in the information technology and professional services fields.

"This system of duplication not only increases DoD's overhead costs, but it is also inefficient because different operations are performing similar or identical functions," coalition President Larry Allen wrote. "These inefficiencies increase costs to both industry and the government, because industry is required to maintain separate contracts for the same services and products, and these costs are ultimately passed on to the government.

To save money, Allen recommended that Defense increase its use of the schedules and governmentwide acquisition contracts. Assad said Defense is training new acquisition hires on the schedules and is encouraging their use when there is data to justify the decision.

"When buying services off the GSA schedules and doing market price-based analysis, that price-based analysis needs to be on point," he told the roomful of service contractors.

On Monday, Defense announced that as part of a broader initiative to cut costs and redirect money to higher priority requirements, officials will seek 2 percent to 3 percent savings annually through more cost-effective procurements.

During a meeting with industry officials, and in a subsequent memo to department acquisition professionals, Defense acquisition chief Ashton Carter said significant savings will be achieved by revamping the acquisition process, increasing competition, and eliminating unproductive or low-value overhead costs.

Among the steps outlined in the memo, and reiterated Wednesday by Assad, is the elimination of virtually all time and materials contracts. The department also plans to phase out award-fee contracts and favor fixed-price or cost-type incentive contracts in which the government and industry share the burden of cost overruns. Small business participation will be stressed, they said, and consistently high-performing vendors will be rewarded.

Defense also will avoid direct buys, in which the department accepts the industry price when only one contractor submits a bid. In the future, Assad said, contracting officials will be required to negotiate with that buyer.

"The reality is that we need to do a better job of ensuring that taxpayers are getting good value, even when we hold a competition and are not successful," he said.

A major part of the reform effort, Assad said, is the growth of the department's acquisition workforce. Defense plans to add about 20,000 new employees within the next five years and is currently ahead of its expected pace. To date, Assad said, the department has added 4,800 staffers, with 65 percent representing new positions and the remainder insourced from the private sector.

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