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HHS’s Suspension of Acquisition Services Leaves Outside Agencies and Contractors in Limbo

It’s been three months since the department announced it was closing down its shared services operations, and many questions remain unanswered.

The Health and Human Services Department’s decision to wind down its acquisition services for outside agencies has left customers scrambling to fill the void and a number of unanswered questions.   

HHS announced in June that it would no longer offer assisted acquisition services for non-HHS customers through its Program Support Center, and gave them until Sept. 30, 2020, to find alternative providers. The center works for HHS and 19 other agencies on a fee-for-service basis, administering more than $1.4 billion in contracts per year, Federal News Network reported. Also, the department put four officials associated with the Program Support Center on paid leave between April and June, Bloomberg News reported.  

“As the result of an internal review that is ongoing, [the Program Support Center] has determined that it does not have the policies, procedures, or internal controls necessary to conduct assisted acquisitions for agencies outside of HHS,” said Melissa McAbee, acting head of contracting at PSC, according to a report in Bloomberg News. As of mid-June, the center was managing 250 contracts for agencies besides HHS, including the Defense Department and Environmental Protection Agency.  

Catherine Bird, principal deputy assistant secretary of HHS for administration, allegedly “raised questions about whether the support center is legally authorized to administer contracts for other agencies” in 2017, Bloomberg News reported. Bird was tapped by President Trump on March 26 to be general counsel of the Federal Labor Relations Authority and now is awaiting Senate confirmation.

Nearly three months after HHS’s announcement, questions remain, including what will happen to bid proposals that are still in the process of being evaluated. The center has essentially suspended communication with customers, according to Federal News Network, even though in the center’s most recent newsletter, James Simpson, acting assistant secretary for acquisitions in the Office of the Assistant Secretary of Administration at HHS, emphasized the need for “continuous communication” in customer service. Additionally, the HHS general counsel ruled that contracts couldn’t be transferred to other agencies, according to Federal News Network. 

Despite multiple attempts, the Program Support Center did not respond to Government Executive for comment. 

“This is a troubling development for federal agencies that have solicitations already underway at … the center as well as for contractors competing for that work,” said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, a trade organization. “In addition, the center is shutting down its contract administration role for more than 500 contracts already awarded on behalf of the Department of Defense and an unknown number of contracts awarded on behalf of civilian agencies.” 

Chvotkin said he is concerned about the immediacy of the center’s actions and the “few readily available alternatives.” The council is working with member companies and government officials to help mitigate the negative effects of this change.

An EPA spokesperson told Government Executive: “The requirements for EPA’s current and future contracts that were to be handled by the HHS Program Support Center will be moved to existing [EPA] contract vehicles, where appropriate; placed on new contract vehicles placed by EPA’s contracts office; or handled through interagency agreements with other federal agencies, when deemed necessary.”  

The Office of Special Counsel, a small independent agency that helps protect federal employees from prohibited personnel practices, also uses the Program Support Center’s services. OSC “has spent significant time and resources identifying assisted acquisition providers for its near-term and long-term procurement needs,” spokesman Zachary Kurz said. “In the near-term, OSC has partnered with the Merit Systems Protection Board to process several mission-critical procurements. Beginning in fiscal year 2020, the General Services Administration has graciously agreed to provide assisted acquisition services to OSC for our procurement needs.”  

Additionally, Federal Occupational Health, an HHS agency within the Program Service Center, on Sept. 1 suspended its administration of employee assistance programs across the Defense Department, including medical and financial assistance. However, after nine days services were temporarily restored to give an extra 60 days for “DoD components to work out a long-term contracting solution,” the Defense Logistics Agency wrote.

The temporary disruption affected employees in the military departments, defense agencies and defense field activities. “The health, safety and welfare of our civilian employees is a priority, and DoD is committed to continuing the services previously provided by the Employee Assistance Program,” said Heather Babb, Defense spokeswoman. The department “is developing long-term solutions to provide this important support to DoD civilian employees.”

Another question that remains is whether other agencies that provide acquisition support services for customers across government will follow in HHS’s footsteps and change or scale back their offerings. The General Services Administration and Interior Business Center did not respond to requests for comment. 

“I do think the government needs to address this situation in a global way, so this type of thing does not occur again because obviously this is very disruptive for other agencies and the contractors,” said Robert Burton, partner with Crowell & Moring LLP and former deputy administrator and acting administrator of the Office of Federal Procurement Policy. He said this situation “highlights the inherent risks” of shared services, which have been encouraged under previous presidential administrations as a tool to improve contracting efficiency and are included in President Trump’s management agenda as well. 

In late April, the Trump administration said it wanted to “make a concerted effort toward establishing a sustainable shared services ecosystem to lower costs and ensure best practices and modern infrastructure pervade government,” NextGov reported. Office of Management and Budget acting Director Russell Vought issued a memo that outlined new policies for shared services and rescinded some earlier guidance. 

“While the [HHS Program Support Center] provided a valuable ‘shared service’ to other federal agencies, its withdrawal does not undercut the administration’s laudable goal of finding appropriate shared services providers across a wide range of governmental functions,” Chvotkin said.