Archive

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Document Name: Reinventing Federal Procurement
Date: 09/14/93
Owner: National Performance Review
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Reinventing

Federal

Procurement

Executive Summary

Move to Guiding Principles from Rigid Rules

PROC01: Reframe Acquisition Policy
PROC02: Build an Innovative Procurement Workforce
PROC03: Encourage More Procurement Innovation

Get Bureaucracy Out of the Way

PROC04: Establish New Simplified Acquisition
Threshold and Procedures
PROC05: Reform Labor Laws and Transform the Labor Department Into an Efficient Partner for Meeting Public Policy Goals
PROC06: Amend Protest Rules
PROC07: Enhance Programs for Small Business and Small
Disadvantaged Business Concerns
PROC08: Reform Information Technology Procurement

Center Authority and Accountability with Line Managers

PROC09: Lower Costs and Reduce Bureaucracy in Small
Purchases Through the Use of Purchase Cards
PROC10: Ensure Customer Focus in Procurement
PROC11: Improve Procurement Ethics Laws

Create Competitive Enterprises

PROC12: Allow for Expanded Choice and Cooperation
in the Use of Supply Schedules

Foster Competitiveness, Commercial Practices, and Excellence in Vendor Performance

PROC13: Foster Reliance on the Commercial Marketplace
PROC14: Expand Electronic Commerce for Federal
Acquisition
PROC15: Encourage Best Value Procurement
PROC16: Promote Excellence in Vendor performance
PROC17: Authorize a two-phase competitive source
selection process
PROC18: Authorize multiyear contracts
PROC19: Conform certain statutory requirements for civilian
agencies to those of defense agencies
PROC20: Streamline buying for the environment

Appendices

A. Summary of Actions by Implementation category
B. Accompanying Reports of the National Performance Review

Implementation Categories

Each action is followed by a number in parentheses that indicates the necessary avenue for effective implementation. Appendix A organizes all actions according to these categories.
(1) Agency heads can do themselves
(2) President, Executive Office of the President, or Office of Management and Budget can do
(3) Requires legislative action
(4) Good idea, but will require additional work, or may be better suited for future action

Abbreviations

ADP Automated Data Processing
CAAC Civilian Agency Acquisition Council
CBD Commerce Business Daily
CICA Competition in Contracting Act
CSIS Center for Strategic and International Studies
DARC Defense Acquisition Regulation Council
DBA Davis-Bacon Act
DCAA Defense Contract Audit Agency
DCMC Defense Contract Management Command
DLA Defense Logistics Agency
DOD Department of Defense
DOE Department of Energy
DOJ Department of Justice
DOL Department of Labor
EC Electronic Commerce
EDI Electronic Data Interchange
EPA Environmental Protection Agency
EEO Equal Employment Opportunity
FAI Federal Acquisition Institute
FAR Federal Acquisition Regulation
FARC Federal Acquisition Regulatory Council
FIRMR Federal Information Resources Management Regulation
FLSA Fair Labor Standards Act
FTE Full-Time Equivalent
FY Fiscal Year
GAO General Accounting Office
GATEC Government Acquisition through Electronic Commerce
GATT General Agreement on Tariffs and Trade
GSA General Services Administration
GSBCA General Services Board of Contract Appeals
HHS Health and Human Services
IG Inspector General
IMPAC International Merchant Purchase Authorization Card
IRM Information Resources Management
IT Information Technology
MSPB Merit Systems Protection Board
NASA National Aeronautics and Space Administration
NPR National Performance Review
OFPP Office of Federal Procurement Policy
OGE Office of Government Ethics
OIRA Office of Information and Regulatory Affairs
OMB Office of Management and Budget
PMR Procurement Management Review
RCRA Resource Conservation and Recovery Act
SBA Small Business Administration
SCA Service Contract Act
VA Department of Veterans Affairs

Executive

Summary

What happens when a major corporation, headquartered in the Washington area, wants to buy supplies or other items? For a small purchase one under $25,000"it needs about four days to process the request with its purchasing office and select a vendor. For purchases of about $100,000, it needs from one to four weeks, with the average being two weeks.1 The company is not encumbered by myriad regulations with minute details on how it should proceed.

What happens, though, when the area's biggest employer, the federal government, tries to buy something? Even for relatively small and simple items, the process is time-consuming. While small purchases require less than a month under simplified procedures, larger purchases need much more time. Even simple procurements under $100,000 require at least three months, and individual contracts often take much longer. Excessive bureaucracy and the inability to do smart buying result in high administrative costs that, in turn, adversely affect the timeliness, quality, and price of purchased items. Additional effects include stifled innovation, lower mission performance, and missed chances for lowering total life-cycle costs.
Does the System Work? To be sure, much of the federal procurement system works reasonably well in terms of fairness and equity. Given the relatively huge volumes of activity and money involved, corruption is remarkably rare and federal contractors contribute much in value. Nevertheless, vendors, government managers, procurement professionals, oversight agencies, the press, and the public are frustrated with the system.2 The administrative costs are enormous"over $7 billion in salaries and benefits alone"and the time needed to acquire goods and services is excessive. Studies"and tales like the one about the Washington area company"show that the administrative costs of supplying the government far exceed comparable costs for private organizations.3

Not infrequently, for instance, a request for proposal on an information technology (IT) procurement of equipment and software that's sold widely in the commercial market will run hundreds of pages; the proposals themselves run thousands of pages. The time required to complete such an acquisition often exceeds the market life of the technology being acquired4"about 49 months for the federal government, as opposed to 13 for the private sector.5 Private sector documents, meanwhile, are much shorter and less costly to prepare.

Overall, the federal government buys a huge amount of goods and services from private vendors. Recent annual expenditures are over $200 billion, about 15 percent of the federal budget"that is, $800 per American every year or, for the nation, about $28,000 every working second of every working day. If implemented, the National Performance Review's (NPR's) recommendations for reinventing federal procurement will save an estimated $22.5 billion from fiscal 1995 to 1999.

NPR recommendations will affect federal costs in two ways. They will reduce administrative costs by reducing personnel and personnel-related expenses, and they will reduce the burdens on vendors doing business with government, thereby resulting in lower costs for the goods and services the government purchases.

These estimates reflect $40 billion in savings less $17.5 billion related to personnel reductions that are reflected in the NPR Accompanying Report Transforming Organizational Structures. Estimates are problematic, however, because the changes involve the entire procurement culture and system and thousands of federal and business organizations and people. In addition, procurement spending levels in future years cannot accurately be predicted. If spending falls significantly below existing levels, the potential dollars saved could drop as well.

Think Big, Act Small. The stakes are huge, for the government and the nation. Over the past several decades, a revolutionary managerial reform movement has been building momentum in the public and private sectors, showing no sign of abating. The "new wave" seeks to de-bureaucratize bureaucracies, believing we must think big and act small in order to survive in an increasingly global competitive marketplace. The federal procurement bureaucracy's excessive rules and regulations clearly place a heavy burden on the government's successful delivery of services and on the ability of U.S. companies to stay competitive. Arcane and out-of-date bureaucratic rules seem an end in themselves, not merely a means to an end. The result is forcing governmental attention inward, stifling innovation and choking off responsiveness to customers.

In the private sector, procurement has risen from a back-office, low-level concern to an increasingly strategic corporate one. Today, few companies are "vertically integrated"i.e., making everything they use. Corporate survival depends on "focus," where corporations own only those resources that give them a competitive advantage in the market. For everything else, they buy (or "outsource") from suppliers (increasingly viewed as strategic partners). In a world of focus and outsourcing, procurement systems indeed become strategic.

Evolution of the Existing Procurement System. History helps to explain our current system. When John Augustus Roebling built the Brooklyn Bridge, popular legend tells us that he designed it to endure stress levels more than 20 times the expected daily levels. Why? Because New York City procurement systems were supposedly so corrupt, Roebling feared that materials normally ordered for such construction would fall short of critical standards. Admittedly, federal procurement systems have never suffered the same corruption as those in patronage-plagued, late-19th-century New York City. But even today, the assumption underlying many federal procurement regulations, laws, and policies is similar to the one Roebling held about New York Citythat everyone is trying to cheat the government and, thus, every possible circumstance must be controlled.

In the early 20th century's Progressive Movement, reformers used bureaucratic tools to control the worst excesses of then-prevalent political machines. Bureaucratic regulation relied on central budgeting offices, personnel offices with civil service protection for government employees, and procurement procedures to ensure relative efficiency and fairness in purchasing. In later years, the government enacted many bureaucratic reforms that were so successful, the private sector adopted them widely. Today's federal procurement system still has its roots in Progressive Era reforms.

The system is based on openness and competition, the primary guarantees of integrity, equity, and efficiency. To ensure that procurements are open and objective, the government has limited the discretion of its public officials. In the Defense Depart-ment, at least 889 laws affect procurement. The Federal Acquisition Regulation (FAR) is 1,600 pages, supplemented by another 2,900 pages of agency-specific procurement regulations. These thousands of pages, along with thousands more of additional agency instructions and case law involving protests, contrast sharply with the Australian government's 93 pages of regulations in 13 separate, easy-to-read guidebooks on procurement.6

Australia reinvented its procurement system on the belief that freeing good people to make smart business decisions will generate huge administrative and contract cost savings. Officials believe it has worked exceptionally well. Our system of excessive laws, regulations, and overseers is premised on a very different assumptionthat, if given discretion, line managers and procurement employees will cheat and act with poor judgment with taxpayer money. The concept of letting managers get value for money, make smart business decisions, and be accountable for results remains foreign to our government.

Problems with the Existing System. Our increasingly complex and bureaucratic procurement rules have given us a larger, but less productive, procurement workforce. The core procurement workforce employed across the government grew from 42,000 in 1980 to 67,000 in 1992, while average productivity per contract specialist fell from $9.4 million in 1980 (in 1992 dollars) to only $6.3 million in contract costs in 1992.7 In fact, the core workforce and related functions (i.e., people working in supply depots and other logistics functions) equals 142,000 about 6 percent of the total federal workforce!

Generally, federal procurement policies stress prior specification of needs, competitive bidding, and accountability through external review and appeals. While procurement personnel do not always automatically choose the low-cost bidder, they face strong pressure to be as objective (and defensible) as possible in selecting vendors who aren't the lowest bidders. The system ensures objectivity by restricting the evaluation to criteria mandated by the agency's mission and published in advance; by limiting the information used for evaluation to that submitted by proposing vendors (lest government exercise bias in selecting information); and, typically, by placing a heavy emphasis on costs. Many line managers and procurement professionals believe the system is designed to protect marginal players in the procurement process and not allow for good management practices, like rewarding contractors who have records of excellence. Over the years, and often in response to an isolated, non-systemic scandal, the government has imposed further controls to restrain employee discretion.

Nowhere is the system's failure more glaringly apparent in not meeting its customers' needs for timely product delivery, at reasonable prices, and with little red tape, than in purchasing IT products. "What takes one year for the private sector to do, we're taking four to five years to do, and the half-life of this stuff is about a year," said former Internal Revenue Service Commissioner Fred T. Goldberg, Jr. "It's a process designed to fail."8 Angry customers or Members of Congress have lambasted nearly every agency contracting official for taking months or years to deliver obsolete computer products that were available, at a cheaper price, at a nearby store or from a catalog. To buy a personal computer through her agency's procurement process, one employee complained that she needed 23 signatures. "Government is the largest purchaser of information technology products," said John Sculley, Apple Computer's former CEO, "and yet it is paying the highest prices and buying the oldest technology."9

High administrative costs might be justified if they produced superior results, such as lower product costs, better quality, or some other desired effect (minority employment, local job development, environmental protection, etc.). But do they? According to surveys of public and private managers and vendors:

* public managers are far less happy
than private managers with their
vendors;

* vendors often work harder for private clients than public clients (because government procurement so restricts the use of past performance in awarding contracts, vendors can "game" the contract i.e., exploit the rules for short-term profits rather than build long-term relationships);10 and

* more vendors, particularly in the technology area, refuse to do business with the government, or they create separate organizations/distribution channels to deal with it. In this way, they insulate the commercial part of the company from the onerous federal requirements and disclosures and develop specialized people to deal with the maze of regulations, policies, and procedures.

The government often does not even have access to some of the best, least expensive products. Companies have voluntarily removed themselves from the procurement process, or the government only gets access through specialized people and organizations that, in and of themselves, create more expensive, less flexible channels. In the case of the IBM Federal Systems Company, for instance, the government does not get to buy from the same IBM that deals with other commercial purchasing activities like those of Ford Motor Company or K-Mart.

Perhaps procurement's major problem is its hidden cost in hindering innovation and excellence. Globally, with private and public organizations undergoing major upheavals and restructuring, innovation is becoming key to survival. Outsourcing and electronic commerce are emerging as strategic issues. In this context, federal practices seem excessively bureaucratic and obsolete. In private contracting, a major study concluded, organizations look for reliable suppliers of quality goods at reasonable prices. But in public contracting, regulations designed to avoid political favoritism insist on a compart-mentalized bidding process that most companies would find ludicrous. Only rarely can the government consider, let alone reward, a contractor's successful past performance when assessing competitive bids for government work. The result: a system that too often delivers goods too late, at too high a price, and too inadequate to do the job. Not surprisingly, public sector buyers are far more frequently dissatisfied than their private sector counterparts with the performance of their vendors.11

A reinvention agenda. This report presents a comprehensive agenda for fundamental procurement reform. In some cases, the solutions require legislation. But most importantly, they require a new direction and model for organizational control one that depends on empowered employees held accountable primarily for external results, not internal rules. Empowered employees should be freed from excessive laws, all accompanying regulations, and internal agency barriers that stifle innovative customer service. The federal procurement system needs to be recognized as an administrative process that balances the costs of the system to taxpayers and vendors, the line manager's needs, and the nation's socioeconomic goals. The law's main role should be to set public policy goals and sensibly protect the system against fraud.

A procurement system must have more customer service and less bureaucracy, and be based primarily on getting value for money. Federal line managers need responsive, efficient, and innovative procurement services delivered by procurement officers with whom they can develop a tested, long-term relationship. Together, line managers and procurement officers must shift from procurement focusing on regulation for the sake of regulation to a system balancing value, price, and fairness to produce a truly cost-effective system.

To create such a system, NPR's recommendations for procurement are based on the following five major themes, which should remain the focus for continuing change even after each process-oriented recommendation is completed.

1. Move from Rigid Rules to Guiding Principles. Corporations and other governments have reduced detailed controls, replacing them with broad guidelines and accountability for results. As we have said, Australia's new procurement regulations cover only 93 pages. Similarly, the federal government needs to revamp its procure-ment policy framework and legitimize the shift from rules to guiding principles. Along with giving broader discretion to front-line managers, the government should build a more professional workforce and encourage innovation. Such changes will encourage procurement officers and line managers to be accountable to their customers.

2. Get Bureaucracy Out of the Way. The government should reduce unneeded burdens and bureaucratic procedures along with adding guiding principles and accountability for results. For federal procurement, NPR recommends a new simplified acquisition threshold that also simplifies procurements from small businesses and small disadvantaged business firms, streamlines labor provisions, and reforms elements of IT procurements.

3. Give Line Managers More Authority and Accountability. The procurement professional should work with, not against, the line manager. Managers should be able to acquire needed tools without going through a procurement office. Thus, line managers should be allowed to expand their use of commercially available purchase cards for relatively small-dollar items. Procurement should focus more on understanding the customer's needs and identifying the best way to satisfy them. With these changes, the effectiveness of procurement organizations can then be measured on results (with input from the customer), as well as compliance with rules. Authority and accountability also would be clarified by revising ethics laws to make them comprehensible and strength-ening their impact, while simultaneously preventing them from stifling essential communications between vendors and the government.

4. Give Line Managers Expanded Access to Competitive Sources of Supply. The federal, state, and local governments should be allowed to cooperate in procurement actions. Federal customers should also be able to use whichever procurement office can provide the best service.

5. Foster Competition, Commercial Practices, and Excellence in Vendor Performance. In general, the nation could reap many benefits by moving federal procurement practices closer to the private sector's best commercial practices. Elements include the increased use of standard commercially available products, expanded use of electronic data interchange and electronic commerce, more emphasis on excellence in vendor performance, and greater reliance on best value (not just least cost) procurements.

The federal government can create a system that works based on these themes. The reinvented procurement system will be much like modern commercial procurement systems, but also will ensure fairness and the other social values and goals uniquely important to public procurements.

Although the recommended reforms will produce immediate and appreciable improvements, they are just the start of a procurement reform process, not its end. Long-term success will require continued cooperation and support from all stake-holders: Congress, the procurement community, agency line managers, vendors, and most importantly the public. These recommendations should not be viewed on an individual basis; each is not a significant change in and of itself. They must be seen as part of a comprehensive view of reforms necessary to produce an efficient and economic procurement system that serves the line manager, taxpayers, and strategic partners (vendors), and accomplishes other societal goals in a well-balanced manner. This report builds a foundation for this fundamental reform.

Endnotes
1. Interview with Allied Signal Technical Services Corporation, Space Operations Group, Columbia, MD.

2. For example, see U.S. Merit Systems Protection Board, Workforce Quality and Federal Procurement An Assessment (July 1992); Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law Report (January 1993); and the Center for Strategic and International Studies, Integrating Civilian and Military Technologies: An Industry Survey (April 1993).

3. Center for Strategic and International Studies, p. 16.

4. It is somewhat ironic that the rallying cry of a recent information technology procurement reform was "Go for 12" hoping against hope that it would be possible to award a contract within a year after a decision to proceed with an acquisition; the average length of time required for large information technology procurements is estimated to be over three years.

5. See U.S. Department of the Treasury, Internal Revenue Service, Management Review of the Contracts and Acquisition Division (Washington, D.C., 1990).

6. See Government of Australia, Department of Administrative Services, Financial Reform Group, Purchasing Reform Group Guidelines (undated).

7. Interview with Office of Management and Budget, Office of Federal Procurement Policy staff, Washington, D.C., July 1993.

8. Greve, Frank, "Terminal Idiots," The Washington Monthly (June 1993), p. 15.

9. Corbin, Lisa, "Technology's Slowing Surge," Government Executive (August 1993), p. 68.

10. John F. Kennedy School of Government, Information Technology and Government Procurement (Cambridge, MA: Harvard University, 1992).

11. DiIulio, John J., Jr., Gerald Garvey, and Donald J. Kettl, Improving Government Performance: An Owner's Manual (Washington, D.C.: Brookings Institution, July 1993), p. 24.

Move to Guiding Principles from Rigid Rules

Introduction

In procurement, as in other areas of human endeavor, controls, guidance, and rules are needed. "No rules" is a mistake. But so are rules that are too many and too rigid. Adequate guidance to federal procurement officials should not require the 1,600 pages of the Federal Acquisition Regulation (FAR) and another 2,900 pages of agency-specific supplements. With the heads of procurement offices buried under an avalanche of regulations and thousands of overseers watching closely for violations of these rigid rules how can procurement offices be expected to pay much attention to their end-result effects on line agency service delivery?

Consequently, the federal procurement policy framework needs to shift to broad guidance in order to encourage both procurement officers and line managers to get closer to the customers, better understand their needs, and produce accordingly. Corporations and other governments have learned to reduce detailed controls and successfully replace them with broad guidelines and clear accountability for results. So can the federal government.

Private sector suppliers also need to be treated as partners to be trusted and valued for their integrity rather than only as potential sources of collusion and other forms of waste, fraud, and abuse.

Some specific actions for shifting federal procurement from rigid rules to guiding principles are to:

* reframe acquisition policy at all levels (e.g., Office of Federal Procurement Policy, Federal Acquisition Regulatory Council);

* improve the education, training, and skills of federal procurement officials; and

* encourage more procurement innovation by authorizing waivers from laws on a test basis.
The background, need, and details of each of these actions is presented in this section.

PROC01:

Reframe Acquisition Policy

Background

Congress directed that the Administrator, Office of Federal Procurement Policy (OFPP), within the Office of Management and Budget, be responsible for providing overall direction of procurement policy and leadership in the development of procurement systems of federal agencies.1

In meeting these responsibilities, the Administrator issues policy letters that are incorporated in the Federal Acquisition Regulation (FAR). The FAR is a massive document exceeding 1,600 pages. In addition to the FAR, the regulatory system includes supplements by federal agencies totaling an additional 2,900 pages, almost twice as large as the FAR.
As described in the basic OFPP legislation, Congress intended the FAR to:

* provide federal procurement officials with a set of uniform, governmentwide acquisition policies, regulations, pro-cedures, contract clauses, and forms;

* be well-written, easy to read, and logically organized;

* reduce excessive paperwork;

* ease doing business with the federal government;

* facilitate agency, industry, and public participation in the process of developing and maintaining the FAR and its supplements;

* limit individual agency regulations to those that are essential to implement-ing governmentwide policies and procedures within the agency; and

* represent policies and procedures required to satisfy the agency's unique needs.

The FAR is issued and maintained jointly by the Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Adminis-tration (NASA), known as the regulatory agencies.2 The Federal Acquisition Regulatory Council (FARC) is composed of the regulatory agencies and OFPP to direct and coordinate governmentwide procure-ment policy and procurement regulatory activities.3 The regulations are developed by two sub-councils the Civilian Agency Acquisition Council (CAAC), chaired by GSA and composed of representatives of 12 other civilian agencies, and the Defense Acquisition Regulation Council (DARC), chaired by DOD and composed of DOD and NASA representatives.4

Need for Change

The FAR is complex and prescriptive. This complexity and specificity primarily results from hundreds of process-oriented legislative requirements affecting the acquisition process, as well as additional administrative requirements imposed by executive branch regulators. Fundamental reform of the acquisition system requires basic changes in the statutory underpinnings and cumulative administrative burdens.

The Section 800 Panel. The Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) recognized in its recent report to Congress that the FAR system has grown increasingly complex due to requirements mandated by statute.5 The panel identified 889 provisions of law related to DOD acquisition. Many of these are also applicable to civilian agencies. The acquisition system is burdened with so many diverse statutory requirements and competing goals that the procurement system's efficiency has been significantly reduced.

The MSPB Survey. A survey conducted by the Merit Systems Protection Board (MSPB) indicates that line managers widely believe that there are too many procurement regulations that are changed too often and are so process-oriented that they minimize contracting officer discretion and stifle innovation.6 When asked in a follow-up survey whether they felt the procurement process appropriately balances the use of public funds with the material needs and requirements of customers, only 26 percent of the line managers surveyed agreed. The survey comments indicate that there are numerous other objectives that receive priority over the line managers. One manager expressed confusion over the ultimate objective of the entire procurement process by stating, "The FAR system does not make it clear what the principal goal of the federal procurement system is. Is it to avoid waste, fraud, and abuse? Is it to implement a social economic agenda? Is it to procure the government's requirements at a fair and reasonable cost?" To be sure, the FAR itself does not state its principal goal.

The CSIS Study. A recent study by the Center for Strategic and International Studies (CSIS) concludes that government procurement laws and regulations add cost without value, impede government access to commercial state-of-the-art technology, and adversely affect U.S. competitiveness by fracturing the nation's high-technology enterprise. The CSIS study finds that companies alter their standard business procedures when the federal government is the customer, leading to higher prices for the government.7 From industry's perspective, policymakers do not allow industry to participate in the development of policy and regulations early enough in the process to have meaningful input.

The GSA Survey. Efforts have been undertaken to reform the system. In 1990, GSA initiated a survey of FAR users to obtain feedback on the document and how it could be improved. Over 2,400 responses were received. Ninety-five percent of respondents suggested one or more ways in which the FAR could be improved. The most common suggestions are to provide greater flexibility for exercising business judgment, consult users in developing regulations, and provide more guidance but less regulation. Based on survey results and additional input from focus groups of government and industry users, a report and recommendations were developed. The FARC also approved a FAR Improvement Project Report and established 19 implementation projects scheduled for completion by 1995.8 Although these changes will help, they do not involve fundamental reform.

Examples of Success. In October 1988, the U.S. Postal Service (USPS) issued a new procurement manual containing innovative procurement regulations. This was made possible by the relatively permissive statute for USPS procurement.9 These regulations incorporated the best of federal and commercial purchasing policies and practices to ensure fairness to offerors and contractors. These regulations permitted more efficient contracting with greater discretion to use good business judgment to obtain the best possible deal for the USPS.

Efforts to reform national procurement systems have also succeeded in other countries. An example is Australia, which several years ago transformed its procure-ment regulations into a set of guiding principles. Australia's equivalent of the FAR is contained in 13 pamphlets totaling 93 pages. These pamphlets state the goals of the procurement system and general operating principles for government officials on all aspects of procurement such as competition, getting best value for the government, specification development, and ethics. They are graphically attractive, written in plain English to maximize understanding by government employees and contractors, and leave no doubts as to expected results.

The other examples cited above reflect simplified procurement policies, rules, and regulations without adversely affecting product quality and costs, system integrity, or public policy goals that the federal government should emulate. The federal government needs to reclaim its procurement policy framework to recognize it as an administrative process governed by clear and simply stated guiding principles while holding line managers and procurement professionals accountable for results.

Actions

1. Convert the Federal Acquisition Regulation from rigid rules to guiding principles. (2)

By July 1994, the Director, Office of Management and Budget (OMB), in consultation with the FAR Council, agency procurement professionals, line managers, and industry, should develop a plan that includes goals, resources, and milestones to:

* rewrite the FAR and its supplements to move it from a system of rigid rules to guiding principles.

* promote decisionmaking at the lowest level possible;

* eliminate unnecessary regulatory requirements;

* facilitate innovative contracting;

* recommend acquisition methods that reflect the short technological life cycle of information technology (IT) and the need to put up-to-date IT tools in the hands of IT and line managers;

* determine the most effective administrative structure for setting governmentwide policy through guidelines in a timely manner; and

* develop a process for obtaining input from those affected by procurement policies.
The plan should be submitted to the chair of the President's Management Council.

2. Implement the procurement reform plan. (2)

Upon completion and approval of the plan, the Director, Office of Management and Budget (OMB), should facilitate implementation of the recommendations. This should include issuing policy letters and tasking the FARC and other affected parties with revising appropriate documents. Agency procurement executives should also implement recommendations and take appropriate action to reduce internal regulations that supplement the FAR.

Although full implementation may require statutory changes, non-statutory solutions should be aggressively pursued.

The OMB Director should report periodically to the President's Management Council on the status of implementing the recommendations.

Cross References to Other NPR Accompanying Reports
Streamlining Management Control, SMC07: Reduce Internal Regulations by More Than 50 Percent.

Endnotes
1. See Office of Federal Procurement Policy Act, 6 (41 U.S.C. 405).
2. 48 CFR 1.102.
3. See Office of Federal Procurement Policy Act, 25 (41 U.S.C. 421).
4. 48 CFR 1.201.
5. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law, Executive Summary (March 1993), p. 1.
6. U.S. Merit Systems Protection Board, "Workforce Quality and Federal Procurement An Assessment," July 1992, p. 21.
7. Center for Strategic and International Studies, Integrating Civilian and Military Technologies: An Industry Survey (Washington, D.C., April 1993), p. 16.
8. Federal Acquisition Regulation (FAR) Improvement Executive Committee, FAR Improvement Project Report (Washington, D.C., October 1992).
9. P.L. 91-375, Section 410.

PROC02:

Build an Innovative Procurement

Workforce

Background

No matter how good a policy may be on paper, it will not be effective without well-motivated, competent people to implement it. Finding, training, and retaining these people will allow the federal government to move the procurement culture from one of doggedly following rules and procedures to one that encourages the use of more discretion through guiding principles. By law, the Administrator, Office of Federal Procurement Policy (OFPP), can foster and promote professionalism of the governmentwide procurement workforce through the Federal Acquisition Institute located in the General Services Administration (GSA).1

The core procurement workforce of general business, purchasing, and contracting personnel has increased by 25,000 since 1980, from 42,000 in that year to 67,000 in 1992. While the procurement workforce has grown, average governmentwide productivity has declined. Contract expenditures per contract specialist were $9.4 million in 1980 (in 1992 dollars), but only $6.3 million in 1992. This is only an approximate measure of performance. However, it is indicative of an increasingly complex procurement process. The core procurement workforce is only a small proportion of the total of 142,000 that also includes people working in supply depots and other logistics functions. The total procurement workforce exceeds 6 percent of the total federal workforce!2

It is important to consider both the quantity and quality of the procurement workforce. Following are highlights from more than a decade of data on federal contract specialists.3

* Roughly two-thirds of all hires for the contracting profession have come from internal placement or promotion of personnel from clerical, technical, and other such fields. By comparison, few have been recruited from sources external to the government (e.g., recent college graduates).

* Throughout the 1980's, 10 percent of the contract specialists on average left the profession every year. In the 1990's, however, turnover slowed to a loss rate of just 7 percent.

* Because of the relatively high past turnover of 10 percent and the large net growth in the profession, a number of contract specialists are relatively inexperienced. As of September 1992, 47 percent of the contracting workforce had less than seven years of experience in their jobs.

* Only 53 percent of the contract specialists have graduated from a college or university with a bachelor's or post-graduate degree. Sixty percent of these college graduates majored in business, law, or public administration.

Given this data, the long-term challenge facing procurement executives is to take the large number of relatively inexperienced personnel and equip them with the professional skills and knowledge necessary to act competently as agents for the government in their contractual dealings with the private sector.

Need for Change

Improving the procurement process requires improving the workforce. One of the consequences of a procurement system dominated by rigid rules versus guidelines is that most procurement people are experts in contracting that is, process instead of buying, which connotes market and product expertise. The change in overall policy from rigid rules to guidelines from centralized to decentralized authority will require a major shift in the procurement skills mix. A better trained, more capable workforce will give improved support to line managers. Steps must therefore be taken to authorize a comprehensive, governmentwide program of procurement workforce improvement to identify, develop, and retain high-quality personnel. This program is needed to meet the staffing requirements in procurement organizations, encourage employees who desire a procurement career to develop their decisionmaking and customer service skills and abilities, and stimulate employees to engage in self-development activities.

The performance of the procurement workforce continues to be questioned. A recent Merit Systems Protection Board (MSPB) report concludes that while the quality of the workforce is generally good, it is not keeping pace with the demands placed upon it by an increasingly complex procurement process. The report notes that supervisors believe employees need to innovate more. Finally, the MSPB report recommends that procurement officials receive additional training to ensure that they are fully competent.4

The Secretary of Defense was recently given authority by Congress to specially manage the defense acquisition workforce.5 Included in this legislation were specific criteria for ensuring a standard of education and experience for people entering the contracting field as well as other acquisition occupations. Highly qualified procurement personnel are needed in civilian agencies, as well as in defense agencies. In the words of a General Accounting Office study of contract administration in civilian agencies, "The contracting deficiencies that we identified generally resulted from people failing to properly carry out their responsibilities, rather than from a need for additional rules and regulations governing what should be done when writing or administering contracts."6

Actions

1. Establish an interagency program to improve the federal government's procurement workforce. (1)

By December 1993, the Administrator, General Services Administration, should develop a three-year resource plan for the Federal Acquisition Institute (FAI) program consistent with governmentwide procurement workforce objectives established by the Administrator, Office of Federal Procurement Policy (OFPP).

By March 1994, the Administrator, OFPP, should establish an interagency Council on Procurement Professionalism to coordinate and recommend policy guidance on career management programs, including training facilities for all agencies. The council should be supported in its policy making by the FAI and the Defense Acquisition University. Steps similar to those taken to enhance the procurement workforce in DOD should be taken in all federal agencies so that a comprehensive acquisition workforce improvement effort can be implemented.

2. Provide civilian agencies with authority similar to DOD's for improving the acquisition workforce. (3)

Legislation should be enacted to amend the OFPP Act to give executive branch agencies necessary additional authority to improve their procurement workforces similar to that provided to the Secretary of Defense. Examples of authorities needed for all procurement agencies include special authorities for:
* authorizing agency heads to require satisfactory completion of mandatory training as a prerequisite for promotion to a higher level position;7
* an acquisition corps;8 and
* other programs to enable improved training, tuition reimbursement, and an acquisition university with special faculty arrangements.9

Endnotes
1. See Office of Federal Procurement Policy Act (41 U.S.C. 405).
2. Data based on Fiscal Year 1992 provided by Office of Management and Budget, Office of Federal Procurement Policy. The 142,000 figure excludes 20,000 supervisors.
3. General Services Administration, Federal Acquisition Institute, Federal Acquisition Workforce Fiscal Year 1991 (Washington, D.C., September 1992).
4. U.S. Merit Systems Protection Board, "Workforce Quality and Federal Procurement An Assessment," July 1992.
5. Title XII of Public Law 101-510, Defense Authorization Act, added a new Chapter 87 on Defense Acquisition Workforce Improvement to Title 10 U.S.C. to establish policies and procedures for the effective and uniform management of the workforce in the Department of Defense.
6. U.S. General Accounting Office, Civilian Agency Procurement: Improvements Needed in Contract Administration, GGD-89-109 (Washington, D.C.: U.S. General Accounting Office, September 1989), pp. 33-34.
7. Title 10 U.S.C., 1722Ð1723.
8. Title 10 U.S.C., 1731Ð1737.
9. Title 10 U.S.C., 1741, 1744 and 1745.

PROC03:

Encourage

More Procurement Innovation

Background

A Merit Systems Protection Board (MSPB) study of the contracting workforce found that the ability to innovate was needed but not being developed by supervisors.1 There is no effective organized means for promoting innovation among agencies, even though many federal agencies are doing business in different ways. For example, agencies are using new automation techniques and procuring goods and services using different methods. In addition, many state, local, and foreign governments and commercial enterprises are testing new contracting concepts. It is likely that the majority of federal government contracting professionals are not even aware of the innovations taking place in corporations and in governments like those of Australia and Texas. The federal government, however, benefits when contracting officials learn new ways of doing business and profit from the lessons learned by others. This knowledge also spurs agencies to improve cumbersome processes. At present, there are legal limits on procurement innovations since, to test a new idea, waivers of existing laws may be required.

The Office of Personnel Management has authority under its statute to conduct demonstration programs and waive personnel laws on a test basis after notification to Congress.2 Similarly, the Office of Federal Procurement Policy (OFPP) Act requires the Federal Acquisition Institute (FAI), located in the General Services Administration (GSA) but under the policy direction of OFPP, to promote and coordinate governmentwide research and studies to improve the procurement process and the laws, policies, methods, regulations, procedures, and forms relating to procure-ment by the executive agencies.3 However, FAI has insufficient resources to do so.

Need for Change

Currently, the procurement system's many control mechanisms discourage innovation. Good ideas are often squashed by any or all of these mechanisms or by the procurement culture itself. The procurement culture includes the system of policymakers and overseers who create and monitor the procurement system. Many of these individuals, not feeling the negative impact of the system of rigid rules, believe no changes are necessary. Thus, they create a climate and a correspondingly cumbersome process where requests for deviations from laws or rules are often viewed suspiciously. These requests are often viewed as attacks on an efficient system they value or simply as self-serving requests to cut corners and, thereby, sacrifice a noble objective of the system. Given the internal hurdles to overcome in terms of the layers of reviews and the usual reaction to requests to try something different, many line managers and contracting officers simply say, why bother? Furthermore, one of the larger barriers to the pursuit of new ideas is the burdensome process of going to Congress to get its approval for waiving applicable laws for pilot tests. Congress has given OFPP authority to request such waivers in P.L. 98-191. However, because the request process is so difficult, it has not been possible to start meaningful pilot tests.

An effective test program, which includes the authority to waive laws for purposes of tests, is essential to promote innovation in federal procurement. Pilot tests are a crucial means to experiment formally with new and innovative ways of doing business and to determine whether these new ideas have merit for expansion past the pilot stage. Further, the federal government needs a means to receive new ideas and communi-cate them quickly to line managers as acceptable procurement system alternatives.

FAI can assist agencies in this testing and dissemination process. In the past, various federal programs have invested heavily in research that has had no practical application, let alone addressed the most pressing concerns of procurement executives, industry, or Congress. By contrast, the FAI has established various committees and working groups to successfully oversee and support FAI career development initiatives. However, the FAI needs an advisory committee to oversee and support its research programs as well. This committee would help the FAI:
* coordinate its work with other federal research activities,
* direct its research to the most pressing needs of the procurement community,
* identify products and services already developed by various contracting activities that could meet those needs if made available governmentwide,
* obtain access to agency facilities and work sites for the conduct of research, and
* identify and benefit from research being done in academia and the private sector.
The lack of a governmentwide vehicle to gather and quickly disseminate successful innovations and new methodologies to contracting professionals hurts the government's ability to continually benefit from others' best practices.

Actions

1. Provide new legislative authority to test innovative procurement methods. (3)

Legislation should be enacted to amend the Office of Federal Procurement Policy (OFPP) Act to give OFPP authority to test innovative procurement methods and to waive laws for purposes of such tests. This would grant OFPP authority similar to that of the Office of Personnel Management.

2. Provide resources to the Federal Acquisition Institute to support innovative, new ideas and procurement techniques. (1)

In this FY96 budget submission, the Administrator, General Services Administration, should identify sufficient resources to enable the Federal Acquisition Institute (FAI) to identify, evaluate, and disseminate new procurement ideas and methods. FAI should be a clearinghouse and repository for information on procurement innovations.

3. Identify a steering group for the Federal Acquisition Institute's research. (2)

By February 1994, the Director, Office of Management and Budget, should identify a steering group to oversee and set strategy for FAI research. The steering group should reflect the views of government acquisition organizations, academia, and industry.

Cross References to Other NPR Accompanying Reports
Streamlining Management Control, SMC08: Expand the Use of Waivers to Encourage Innovation.

Endnotes
1. U.S. Merit Systems Protection Board (MSPB), "Workforce Quality and Federal Procurement An Assessment," July 1992, p. 52.
2. Title 5 U.S.C. 47.
3. See the Office of Federal Procurement Policy Act, 41 U.S.C. 405.

Get Bureaucracy Out of the Way

Introduction

Rules require compliance, but good rules also offer something in return, like fairness, opportunity, or predictability. We will always need rules, but the rules should never be an end in themselves. If we add guiding principles and accountability for results, we also need to reduce unnecessary burdens from the inevitable bureaucratic accretions of the past decades.

While federal purchasing must continue to consider fairness, minimum wage laws, and other public values, in addition to the usefulness and cost of goods and services being purchased, the rules governing these considerations should be as simple and sensible as possible. To constructively get bureaucracy out of the way, we need to:
* establish a new simplified acquisition threshold and procedures,
* systematically reform labor laws and regulations to reduce their impact on procurement while simultaneously preserving their guarantees for labor,
* amend protest rules to protect rights of protesters while increasing the speed and reducing the costs of the protest forum,
* enhance programs for small business and small disadvantaged business concerns, and
* reform information technology procurement.
The background, need, and details of each of these actions is presented in this section.

PROC04:

Establish New Simplified Acquisition Threshold and Procedures

Background

Congress has long recognized federal agencies' need for a simple, low-cost process for making relatively small-dollar-value purchases. For more than 40 years, Congress has required that procurement regulations provide for such procedures. Under small purchase procedures currently $25,000 or less competitive purchases can be made simply by obtaining quotations from contractors by telephone, mail, or in some cases electronically. The simplified purchase procedures expedite the procurement process; it normally takes less than one month to conduct these transactions because only a reasonable number of price quotations must be obtained to achieve competition. In contrast, larger purchases over $25,000, even simple ones, normally take at least three months to complete. For example, to compete a $40,000 janitorial contract to clean a building for one year requires an extremely cumbersome process that is excessive considering the size of the acquisition.

Small Business Set-Asides. The Small Business Act requires that all small purchases using simplified acquisition procedures be reserved exclusively for small businesses if there is a reasonable expectation of obtaining from two or more small businesses price quotations that will be competitive in terms of market price, quality, and delivery.1 Under a small business reserve, a small business may provide products of a large business. If the proposed procurement is expected to exceed $10,000 ($5,000 for defense agencies), but is not expected to exceed $25,000, the Small Business Act and the Office of Federal Procurement Policy (OFPP) Act require that agencies post either a notice describing the proposed procurement or a copy of the solicitation. The posting must be for a period of not less than 10 days in a public place at the contracting office issuing the solicitation.

Small Purchase Floors. In the past, when Congress enacted legislation that increased the complexity of the federal acquisition process, it accommodated the need for economy and efficiency in the procurement process by exempting small purchases made using simplified procedures. This typically was accomplished by establishing a "floor" so that the new legislation did not apply to contracts written at dollar values below the existing statutory threshold for use of small purchase procedures. For example, when the Service Contract Act of 1965 was enacted, it specified $2,500 as the floor; that was also the small purchase threshold at that time. However, while the ceiling or threshold for small purchases was regularly adjusted to account for the declining purchasing power of the dollar, the statutory floors for applying other statutory requirements, like the Service Contract Act, were not adjusted. Similarly, the President often included a floor tied to the current threshold for use of simplified procedures when issuing executive orders affecting the procurement process, but did not provide for these thresholds to be adjusted for inflation. In addition, a number of other laws and executive orders require contract clauses be included in all contracts regardless of dollar amount.

As if small purchase procedures originally designed to be a simple method of buying were not complex enough with government laws and rules, individual agencies often add further limitations or additional administrative burdens on their use. For example, agencies have placed additional limits on use of imprest funds or require more documentation than contemplated by the Federal Acquisition Regulation (FAR).

Need for Change

Government line managers and procure-ment officers are frustrated with the procure-ment process when trying to buy supplies or services under $100,000 because the administrative costs, burdensome rules, and time frames seem so far out of proportion with the cost and nature of the things being acquired. The result is that managers cannot get small-dollar items and services quickly and with a reasonable administrative burden. The federal procurement process requires a minimum of three months for purchases under $100,000. Contrast this with a major company local to Washington, D.C., that averages one to four weeks from the time a request is submitted to the purchasing office to the time a contract is awarded to a vendor for purchases in the range of $100,000.2

The Current Threshold. The current threshold of $25,000 was established in 1986. The OFPP Act provides for periodic review every five years beginning in 1995, with adjustments limited to the rate of inflation.3 The Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) has recommended that Congress raise the threshold to $100,000 for DOD.4 Congress has also begun to think in terms of a higher threshold by setting $100,000 as the amount that triggers application of several recent statutes (e.g., procurement integrity and anti-lobbying).

Raising the Threshold. A compelling reason to raise the threshold for use of simplified procedures to $100,000 governmentwide is that it would simplify the paperwork burden for a significant number of procurement transactions without adversely impacting the socioeconomic programs and competitive aspects of most federal spending. For example, during fiscal year 1992, the federal government purchased $200 billion in goods and services. Fifty-seven percent, or 11.5 million, of the total transactions were made using small purchase procedures, yet these transactions represented only 5.6 percent, or $11.3 billion, of the total amount spent. Based on fiscal year 1992 data, if the threshold were raised to $100,000, an additional 45,500 procure-ments per year could be made using simplified acquisition procedures. The increased threshold would capture a large number of additional transactions, thereby significantly reducing the paperwork burden and its associated costs, but would only increase the total federal spending using this simplified process from $11.3 billion to $13.8 billion, an increase of $2.5 billion.5 The vast majority of federal procurement dollars would still be spent under the umbrella of all socioeconomic laws and regulations.

Conforming Other Requirements to the New Threshold. Adjusting the floors of the other statutory requirements consistent with the simplified acquisition threshold would eliminate 1,600 federal jobs. In addition, it would save $50 million in administrative costs by reducing the paperwork burden caused by the current threshold. Further savings could also accrue up to $800 million per year and be passed to the government and taxpayers from lower contractor costs for goods and services. For example, the threshold for the Davis-Bacon Act (DBA), which sets wage rates for contracts for construction, alteration, or repair (including painting and decorating) of public buildings or public works, is $2,000. This threshold has remained unchanged since enactment in 1931. As a result, if the government hires a contractor to perform a $2,500 painting job at a federal building, the contracting official is required to:

* find and select a wage determination (a list of minimum wage rates) or request a wage determination from the Department of Labor (DOL) if none of the published wage determinations apply;
* include the wage determination in the solicitation and contract;
* give the contractor a poster explaining the DBA that is posted at the job site along with the wage determination;
* collect and review the contractor's and subcontractor's weekly payroll records and statements of compliance with the minimum wage and fringe benefit requirements;
* return payroll records for correction if discrepancies are found;
* periodically interview contractor employees to ensure they are being paid the proper wages and provided applicable benefits; and
* withhold contract payments and take other steps, if necessary, to enforce the requirements of the DBA.

When Congress originally established the DBA threshold in 1931, it apparently intended that the DBA apply to larger purchases.6 However, because the thresholds for applying the DBA and other statutes have not been raised over the years, these requirements continue to be applied to what are now very small purchases. The require-ments of the various statutes, identified in Table 1, place significant administrative burdens, especially on small businesses, on a process originally intended to be free from such burdens. Raising the thresholds of other statutes to the same threshold for using simplified procedures and eliminating requirements for contract clauses would make more than 11 million small purchases (that would fall under the new simplified acquisition threshold of $100,000) simpler and less expensive to execute and administer.

As the Davis-Bacon example illustrates, the administrative requirements of these laws are highly complex and cause heavy paperwork burdens to government and businesses alike. The cumulative effects of these outmoded thresholds applied to the millions of small purchase transactions annually is enormous. In passing the original legislation for each program, Congress recognized the need to balance the cost of these social requirements with their benefits to various segments of the public and established thresholds below which the requirements do not apply. In failing to raise these thresholds commensurate with inflation, that balance has been lost with large resulting costs to the taxpayer. Amending these requirements will result in large savings to the government and businesses while restoring the balance originally intended between costs to the government and benefits to the public. Opening purchases of $2,500 or less to both small and large businesses will simplify the many very small purchases most needed to provide line managers their working tools.

Introducing Technology. Finally, application of electronic data interchange (EDI) technology will facilitate the simplified acquisition process by ensuring full access by small businesses to government contracting opportunities and minimizing procurement lead time. Use of EDI can replace transactions traditionally conducted on paper with paperless transactions conducted electronically by automated processes.

Under current law, purchases over $25,000 must be advertised in the Commerce Business Daily (CBD). The advertisement process is intended to provide adequate notice to businesses of the government's requirements and normally takes a period of 45 days.7 The threshold for the requirement to advertise in the CBD would automatically increase to the new threshold of $100,000 for simplified acquisition procedures as recommended by NPR. Below the new level, the requirement for CBD advertisement would be eliminated. Even though most purchases below that level would be set aside for small businesses, there is substantial concern in the small business community about this increase. While federal managers would benefit from a reduction of the 45-day lead time, small businesses fear that there would be insufficient visibility of and access to federal contracting opportunities due to the loss of the public announcement in the CBD.

Use of EDI in the contracting process should allay these fears. The Canadian government has established an electronic bulletin board to provide on-line access to information on contracting opportunities similar to the information published in the CBD. The bulletin board provides timely information and easy access for business. By establishing a similar capability to replace the CBD, the federal government can ensure small business access to information on contracting opportunities while at the same time reducing the 45-day delay associated with advertising in the CBD and reducing printing and mailing costs.

In addition, the private sector is increasingly turning to EDI to conduct business, and some federal agencies have started using EDI to conduct purchasing activities. This trend is highly promising because purchases made through simplified acquisition procedures are the most easily adaptable to an electronic environment.8

Actions

1. Enact legislation simplifying procurement. (3)

Legislation should be enacted to (a) increase the threshold for use of simplified acquisition procedures from $25,000 to $100,000; (b) continue to reserve purchases in excess of $2,500 made using simplified procedures for small business; (c) amend the requirements for posting contracting opportunities to provide improved access to information on procurements in excess of $25,000 through the use of electronic techniques (e.g., an electronic bulletin board or electronic commerce); and (d) repeal or amend the statutes identified in Table 1 to either tie their applicability to the new threshold for use of simplified acquisition procedures or eliminate the requirement for a written contract clause for purchases made using such procedures. Unless all of these changes are made simultaneously, the government's efforts to simplify the process and shift to an electronic commerce environment will be frustrated. Simply raising the threshold for small purchases without making the other recommended changes will have minimal impact because the complexities and burdens associated with the other statutory requirements will continue to exist.9

2. Enact legislation simplifying Department of Defense (DOD) unique procurement requirements. (3)
Congress should amend those DOD-unique requirements as identified by the Section 800 Panel in order to simplify procedures for procurements under the simplified acquisition threshold.

3. Establish a single electronic bulletin board capability to provide access to information on contracting opportunities. (2)

By July 1995, the President's Management Council, in coordination with the Office of Federal Procurement Policy of OMB and in consultation with the Administrator, General Services Administration, the Secretary of Defense, and the Secretary of Commerce, should establish an electronic bulletin board capability to be used by all agencies to post purchase opportunities in excess of $25,000. This electronic bulletin board capacity shall be implemented through the governmentwide electronic commerce federal acquisition system.10 This will enable the entire business community, and especially small businesses, to access information pending full implementation of electronic commerce.

4. Revise agency acquisition-related regulations to eliminate internal
barriers. (1)
By November 30, 1995, the heads of federal agencies should charge their senior procurement executives to review and revise agency regulations and internal agency guidance to ensure they do not inappropriately impede the objectives of simplified purchasing. Such regulations should not add additional administrative burdens, limits, or documentation beyond FAR requirements.

5. Develop a pamphlet on statutory acquisition requirements for distribution to small businesses. (3)

Within 60 days of threshold changes, the Director, OMB, should develop, in consultation with the Administrator, Small Business Administration (SBA), a pamphlet on the statutory requirements that will continue to apply to purchases made using simplified acquisition procedures, but that will not be included in written contract clauses. The pamphlet should be distributed to the small business community through SBA and procuring agencies.

Cross References to Other NPR Accompanying Reports
Streamlining Management Control, SMC07: Reduce Internal Regulations by More Than 50 Percent.

Endnotes
1. Section 15(j) of the Small Business Act (15 U.S.C. 644(j)).
2. Interview with Allied Signal Technical Services Corporation, Space Operations Group, Columbia, MD.
3. Section 4(II) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(II)).
4. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws, Executive Summary (March 1993), p. 28.
5. Data as of July 1993 provided by the General Services Administration, Federal Procurement Data Center.
6. This is supported by the fact that when Congress first provided for small purchase procedures in the Armed Services Procurement Act in 1947 (and the Federal Property and Administrative Services Act in 1949), it defined small purchases as those under $1,000.
7. Section 18 of the Office of Federal Procurement Policy Act (41 U.S.C. 416) and Section 8(e) of the Small Business Act (15 U.S.C. 637(e)).
8. Ibid.
9. Vietnam Era Veterans Readjustment Assistance Act of 1972 (38 U.S.C. 2012) and Section 503(a) of the Rehabilitation Act of 1973 (29 U.S.C. 793(a))
10. See PROC11: "Expand Electronic Commerce for Federal Acquisition" in this report.

Table 1

Statutes Affected and Changes Proposed

Law Threshold Proposal
1. Walsh-Healey Public Contracts Act Supply contract over $10,000 Repeal law [see PROC05].
(41 U.S.C. 35 et seq.)
2. Work Hours and Safety Standards Act of 1962 Construction contract over $2,000 Tie to simplified acquisition (40 U.S.C. 327 et seq.) Service contract over $2,500 threshold as defined in OFPP
Act (41 U.S.C. 403). [NPR
proposal is for new $100,000
threshold under OFPP Act.]
3. Buy American Act (41 U.S.C. 10a et seq.) Zero $threshold Same as #2.
4. Cargo Preference Act (46 U.S.C. app 1241(b)) Zero $ threshold Same as #2.
and Preference to U.S. Vessels
(10 U.S.C. 2631)
5. Davis-Bacon Act (40 U.S.C. 276(a)) $2,000 Same as #2.
6. Service Contract Act of 1965 $2,500 Same as #2.
(41 U.S.C. 351 et seq.)
7. Drug-Free Workplace (41 U.S.C. 701) $25,000 Same as #2.
8. Miller Act (40 U.S.C. 270a et seq.) $25,000 Same as #2.
9. Gratuities (10 U.S.C. 2207) Zero $ threshold Continue to apply law but
eliminate contract clause for
purchases made using simpli- fied acquisition procedures.
10. Covenant Against Contingent Fees Zero $ threshold Same as #9.
(10 U.S.C. 2306(b) and 41 U.S.C. 254(a))
11. Officials Not To Benefit (41 U.S.C. 22) Zero $ threshold Same as #9.
12. Anti-Kickback Act (41 U.S.C. 57 et seq.) Zero $ threshold Same as #9.
13. Restrictions on Subcontractor Sales to Zero $ threshold Same as #9.
the Government (10 U.S.C. 2402
and 41 U.S.C. 253g)
14. Office of Federal Procurement Policy Act Zero $ threshold Repeal certification
(41 U.S.C. 423(e)) requirements for purchases
under simplified acquisition
threshold [see PROC11].

PROC05:

Reform Labor Laws and Transform the Labor Department into an Efficient Partner for Meeting Public

Policy Goals

Background

Five labor laws are implemented through the federal procurement system. They are:

* The Davis-Bacon Act of 1931, which requires each contract for the construction, alteration, or repair of public buildings or works in excess of $2,000 to specify the minimum wages to be paid to various classes of laborers and mechanics.1 The minimum wages, including fringe benefits, are those the Secretary of Labor determines to be "prevailing" for the laborers and mechanics employed on projects of a similar character in the area in which the work is to be performed. The requirements of the act are incorporated in more than 70 other statutes that authorize federally assisted construction.

* The Copeland Anti-Kickback Act of 1934, which regulates payroll deductions on federal or federally assisted construction.2 This law prohibits anyone, under penalty of fine and/or imprisonment, from inducing an employee to give up any part of the compensation to which he or she is entitled under his contract of employment and requires contractors to submit a weekly statement of compliance to the agency contracting officer. Further, the act's implementing regulations require contractors on federal projects to submit and certify weekly payroll reports detailing daily hours worked, wage rates, total earnings, and any deductions.

* The Service Contract Act of 1965, which requires contractors on covered contracts in excess of $2,500 to pay service employees the minimum wage prevailing in the locality and provide specified minimum fringe benefits. The act applies to federal contracts if the principal purpose of the contract is to furnish services in the United States through the use of service employees.3 It also prohibits employment under hazardous or unsanitary conditions.

* The Walsh-Healey Public Contracts Act, which requires contractors manufacturing or furnishing materials, supplies, articles, and equipment to the federal government under contracts that exceed $10,000 to qualify as a manufacturer or regular dealer, pay all employees working under the contract at least the minimum wage as determined by the Secretary of Labor, agree that no employee will be required to work in excess of 40 hours a week unless paid overtime, avoid use of convict labor or persons under 16 years of age, and agree that no part of the contract will be performed in unsanitary, hazardous, or dangerous work places.4

* The Contract Work Hours and Safety Standards Act, which requires that certain contracts contain a clause specifying that no laborer or mechanic doing any part of the work required by the contract be permitted or required to work more than 40 hours in any work-week unless paid for all such overtime hours at not less than 11Ú2 times the basic rate of pay.5

These prevailing wage laws were enacted because the federal procurement system generally required that contracts be awarded to the lowest responsible and responsive bidder through a sealed bid process. Unfortunately, in labor-intensive industries, like construction and service, the most expedient way to lower a bid may be to lower labor costs. In recognition of the influence that the government's buying power had on the economies of local areas, Congress enacted laws to protect minimum wages and benefits. The objective was to require contractors to compete by becoming more efficient, applying new technologies, or using a more productive workforce instead of simply lowering wages. With the enactment of the Competition in Contracting Act in 1984, Congress shifted the focus away from the sealed bidding process to the concept of providing full and open competition using the most appropriate method of procurement. This change, however, did not diminish the underlying purpose and need for prevailing wage laws. Even though procuring agencies may have greater flexibility to consider other factors in addition to price in selecting contractors, price remains a principal selection criterion for almost all covered contracts, whereas employee labor standards are not considered in the selection process.

In addition, Executive Order 11246, "Equal Employment Opportunity," requires federal contractors with contracts in excess of $10,000 to not discriminate in employment because of race, creed, color, sex, or national origin and to take affirmative steps to promote the employment opportunities of these protected groups.6

Need for Change

The government and industry bear significant costs in implementing these laws. These administrative costs need to be balanced against the intended social benefits. Alternative methods should be explored for achieving these benefits at lower cost. For example, savings from amending the Copeland Act to modify the requirement for submission of certified weekly payrolls alone would require 600 fewer federal employees per year to fulfill the administrative requirements, thereby saving the government $20 million per year. In addition, the construction industry would benefit significantly. During fiscal year 1992, federal construction contracts over $100,000 totaled $11.1 billion. Modification of the weekly payroll requirement would eliminate a great deal of paperwork burden for construction businesses and should result in a 1 percent savings to these businesses or up to $111 million in savings per year that could be passed onto the government and taxpayer. Significant savings can also be expected from amending the Davis-Bacon Act and the Service Contract Act.7

The following statutory and regulatory authorities must be re-examined.
Davis-Bacon Act and Copeland Anti-Kickback Act. The Davis-Bacon Act has been a recurring public policy issue, as well as the subject of a number of government and private studies. These studies have produced recommendations ranging from repeal of the Act to amendments to supplemental regulations. Some procurement experts contend that the requirements of the Davis-Bacon and Copeland Acts for submission of payrolls and statements of compliance are burdensome. Others argue that both acts are impediments to small and minority business participation in federal construction contracting. For example, the more than 1,600 delegates to the 1986 White House Conference on Small Business ranked repealing the Davis-Bacon Act as their seventh most important recommendation out of 60 reported to the President and Congress.

The 1992 Budget Resolution passed by the House of Representatives urged the House Committee with jurisdiction over the Davis-Bacon Act to study the potential for possible savings to the federal government from the reform of the Act and report committee findings to the full House of Representatives.8

Service Contract Act. The Service Contract Act places a five-year limitation on the term of service contracts subject to the Act and requires a new wage determination to be incorporated in multiyear contracts at least every two years. The five-year limitation is inconsistent with the government's need to enter into long-term contracts.9 It is contrary to the objectives of the Act to limit the term of contracts. As long as the Act requires the incorporation of a new wage determination every two years, service employees' interests are protected. Longer-term contracts provide more stable employment for service employees.

Walsh-Healey Public Contracts Act. Over time, the protections provided by the Walsh-Healey Public Contracts Act have been superseded or duplicated by subsequent legislation and congressional action. The overtime pay provisions are the same as those in the Fair Labor Standards Act (FLSA). Walsh-Healey's minimum wage provisions are also essentially the same as the FLSA because the Secretary of Labor has not issued a wage determination since 1963. The act's prohibition against purchasing goods made with child labor is duplicated by the FLSA, which prohibits oppressive child labor in any facility that ships goods in interstate commerce. The convict labor provisions are the only provisions that have not been overtaken by events; these provisions could easily be incorporated into the provisions of the existing executive order on convict labor.

The Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) recommended the thresholds for application of the Davis-Bacon and Service Contract Acts be increased to $100,000, the requirement for submission of weekly payrolls be modified, the Davis-Bacon Act wage schedules be issued annually per locality, and the Walsh-Healey Public Contracts Act be repealed except for the provisions of the act dealing with convict labor.10

Debarment Provisions. In addition to changes in labor laws, the statutory provisions related to debarment need to be simplified. Currently, the Davis-Bacon Act authorizes the Comptroller General to debar contractors for violations and to disburse back wages to employees. The Service Contract Act, the Walsh-Healey Act, and the Contract Work Hours and Safety Standards Act require the Department of Labor (DOL) to notify the Comptroller General when it debars a contractor for violating the law. Under each statute, the Comptroller General is required to prepare and distribute a list of the parties debarred. Currently the Comptroller General distributes a list to various government entities, including the General Services Administration (GSA), so the information may be included on the List of Parties Excluded from Federal Procurement or Nonprocurement Programs that GSA maintains and distributes through the Superintendent of Documents. The requirement to process recommendations for debarment and/or notices of debarment to the Comptroller General for distribution has become an unnecessary duplication of effort. The information should be sent directly to GSA for inclusion on the List of Parties Excluded from Federal Procurement or Nonprocurement Programs.

Use of Information Technology. Further, due to budget limitations, DOL has not been able to maximize the use of information technology in implementing the various labor laws. For example, most wage determinations under the Davis-Bacon Act are published, and contracting officers select the one that applies to a particular construction project if the cost is estimated to exceed $2,000. Improvements are also needed in DOL regulations, especially those allowing interested parties to challenge a wage determination issued under the Service Contract Act as being at substantial variance with the wages prevailing in the locality or regulations that do not provide time frames for resolving cases. Wage determinations that are based on collective bargaining agreements may also be challenged when there is a question of whether the collective bargaining agreement was a product of arm's-length negotiations. DOL's track record in terms of providing a timely hearing and resolution of substantial variance cases is not good. For example, some cases are dismissed as moot because the government contract involved has already expired.11

Equal Employment Opportunity. Finally, regulations implementing the executive order on equal employment opportunity (EEO) provide for a paper-intensive process that adds little or no value but delays contract award. The regulations issued by DOL implementing the executive order require contracting officers to request a preaward EEO compliance review or clearance before awarding a contract in excess of $1 million.12 Contracting officers submit requests for preaward clearances to the Office of Federal Contract Compliance Programs at DOL. DOL processes the request and notifies the contracting officer in writing that the clearance is granted or that a full review is scheduled. In either case, the contract is awarded. During fiscal year 1992, approximately 23,000 requests were submitted but only 185 full reviews were conducted.13 (Due to reduced staff and budget, most requests were automatically approved because an on-site review could not be conducted within 30 days.)

The small number of full reviews conducted by DOL does not justify the cost associated with processing every action over $1 million through DOL. DOL can enhance enforcement of the executive order by using its resources more effectively to conduct more on-site reviews.

Actions

1. Enact legislation to simplify acquisition labor laws. (3)

The Davis-Bacon Act should be amended to:
* apply the new simplified acquisition threshold to federally funded and assisted contracts,
* authorize the Secretary of Labor to debar individuals and firms for violations and to disburse payments to employees directly from payments withheld under the terms of contracts, and
* use the listing of persons or firms debarred on the List of Parties Excluded from Federal Procurement or Nonprocurement Programs maintained by GSA to eliminate the current duplications.
The Copeland Act should be amended to:
* eliminate the requirement for submission of certified payrolls and substitute a requirement that the contractor submit, along with each request for a progress or final payment, a certification that all persons employed on the project have been paid the full wages earned without unauthorized deductions;
* require the contractor to maintain payroll and other basic records relating to payroll for a period of three years after completion of the work, submit them to the contracting officer if instructed to do so, and make them available for inspection by authorized representatives of the Department of Labor or the contracting agency;
* require the contracting agency to suspend all payments to the contractor if the contractor fails to respond to a request for payrolls; and
* authorize the Secretary of Labor to debar contractors who fail to submit payrolls when requested to do so or who otherwise refuse to make records available for inspection. The certification would be submitted as a part of the normal progress and final payment request to avoid an additional submission and certification. The contractor would be required to maintain records for each employee on hours worked daily and during the payroll period, hourly rates of wages paid (including rate of contributions or costs anticipated for bona fide fringe benefits), all deductions made, and actual wages paid.
The Service Contract Act should be amended to:
* eliminate the five-year limitation on the term of contracts but retain the requirement for adjustment of wages and benefits under multiyear contracts at a minimum every two years, and
* provide for a listing of persons or firms debarred for violations of the Act to be included on GSA's List of Parties Excluded from Federal Procurement or Nonprocurement Programs.

The Contract Work Hours and Safety Standards Act should be amended to provide for a listing of names of persons or firms debarred for violations of the Act to be included on GSA's List of Parties Excluded from Federal Procurement or Nonprocurement Programs.
The Walsh-Healey Public Contracts Act should be repealed.

2. Amend the executive order on convict labor. (2)

Within 30 days of repeal of the Walsh-Healey Public Contracts Act, the President should amend Executive Order 11755 to incorporate the convict labor provisions of the Walsh-Healey Public Contracts Act. This will provide for the continued option for agencies to procure goods from the Federal Prison Industries, as well as goods made by federal and state prisoners, inside or outside of prison.

3. Provide on-line access to Davis-Bacon Act wage schedules through an electronic system. (1)
By January 1995, the Secretary of Labor should establish an electronic system to provide on-line access to Davis-Bacon Act wage determinations. The system should be compatible with the system recommended for the Service Contract Act wage determinations and provide a mechanism for electronically requesting specific project wage determinations under the act.14
4. Revise labor regulations to improve service. (1)

By January 1995, the Secretary of Labor should revise labor regulations to:
* require hearings be held on substantial variance cases under section 4(c) of the Service Contract Act and decisions rendered within 60 calendar days, or the Secretary be notified of the delay and provided with an explanation; and
* eliminate the requirement for a preaward equal employment opportunity clearance before awarding contracts or first-tier subcontracts for an estimated or actual amount of $1 million or more.

Cross References to Other NPR Accompanying Reports
Reinventing Support Services, SUP03: Improve Distribution Systems to Reduce Costly Inventories.
Department of Labor, DOL14: Apply Information Technology to Expedite Wage Determinations for Federal Contracts.

Endnotes
1. Davis-Bacon Act, 40 U.S Code 276a-b (March 3, 1931).
2. Copeland Act, as amended, 40 U.S.C. 276c (June 13, 1934).
3. Service Contract Act of 1965, 41 U.S.C., 351-358.
4. Walsh-Healey Act, 41 U.S.C., 34-45.
5. Contract Work Hours and Safety Standards Act, 40 U.S.C. 327-333.
6. Executive Order 11246, "Equal Employment Opportunity," September 24, 1965.
7. See "PROC04: Establish New Simplified Acquisition Threshold and Procedures" in this report.
8. See Reducing the Deficit: Spending and Revenue Options (Washington, D.C., February 1992), p. 179.
9. See "PROC18: Authorize Multiyear Contracts" in this report.
10. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law (January 1993), pp. 4-25 Ð 4-63.
11. See Board of Service Contract Appeals, Case Number 92-20, August 26, 1992, in the matter of Porshia Alexander of America, Inc.
12. 41 CFR 60-1 and 60-4.
13. Data as of July 1993 provided by the U.S. Department of Labor, Office of Federal Contract Compliance Program.
14. See "DOL14: Apply Information Technology to Expedite Wage Determinations for Federal Contracts," National Performance Review Accompanying Report, Department of Labor (Washington, D.C.: U.S. Government Printing Office, September 1993).

PROC06:

Amend Protest Rules

Background

Protests, both before and after contract award, are an important means for objectively reviewing meritorious grievances of disappointed bidders of government actions. Forcing a review of questionable or improper actions strengthens the procurement system and maintains the integrity and accountabil-ity of government. However, unless the protest is clearly frivolous, and thus subject to summary dismissal, it delays further action on the procurement no matter how likely it is that the government's actions were correct. This delay can force all competitors and the government to freeze their actions until the protest is resolved unless the government can demonstrate that the acquisition is "urgent and compelling." Even a frivolous protest can cause some delay and additional workload prior to summary dismissal if the agency has to notify all other competitors and the agency and interested competitors have to respond as to whether the protest is frivolous.

In 1992, 3,200 protests were filed with the General Accounting Office (GAO). Another 350 protests involving the acquisition of information technology (IT) under the Brooks Act were filed with the General Services Board of Contract Appeals (GSBCA).1 A protester can file a protest under a solicitation with the contracting agency, GAO, the Court of Federal Claims, District Courts, or the GSBCA (if IT is involved). Protests submitted to the contracting officer at the contracting agency are less costly and do not necessarily involve significant delays.2 The various protest forums are set forth in Table 1.

Need for Change

People in industry and government believe that communication during the procurement process has been curtailed because of the fear that a statement by a government official will be misunderstood and will inadvertently trigger a protest.3 This causes inadequate debriefings of offerors, which in turn creates suspicion and can generate a protest that could have otherwise been avoided. The procurement system cannot improve without better channels of communication between buyers and sellers.

In addition, fear of protests has had unintended adverse consequences on the procurement system. Protests have caused procurement officers to redirect their attention away from service to the customer to following rules and procedures rigidly and compiling paperwork in an effort to make their decisions "protest-proof." This, of course, results in costly additional paperwork, delays in procurements of goods and services required to meet public needs, and greater administrative costs to the government and taxpayer. Moreover, a high-ranking Treasury Department Information Resources Management (IRM) official recently said, "The internal costs of increased staff hours [to avert protests] may not be immediately noticeable in the government's budget, but it does become noticeable when the attention and energy of the IRM staffs are diverted from implementing quality systems to merely managing the process."4
A recent survey of over 1,000 line managers confirms these contentions. Over 80 percent of federal managers surveyed believe that their contracting officers cause delays by rigidly following procurement rules, and over 60 percent believe that contracting officers are most concerned about making awards protest-proof.5

Evolution of Existing Systems. Prior to 1984, administrative protests were an inexpensive administrative procedure for contractors to force an objective review of contracting agency actions. The system became more complex in 1984 when the Competition in Contracting Act (CICA) vested both GAO and GSBCA with explicit statutory authority to undertake ever more formal reviews using independent standards. Where company presidents or marketing executives once argued their protest cases, attorneys now usually do so. This is primarily because the GSBCA uses more court-like procedures such as discovery and fact finding and the entire contract record is reviewed anew (or "de novo"). GAO has indicated that if it too employed certain GSBCA practices, like allowing depositions, it could lead to higher costs that could make the protest system less accessible and affordable.6 However, through such practices, the GSBCA, a quasi-independent body, can potentially substitute its judgment for that of agency contracting officials. Many contractors think this allows more effective review of agency actions as was intended by CICA. Most procurement professionals and line managers, however, believe GSBCA should use the same test used by the courts that would protect contractors against abuses of discretion and not second-guess agency judgments. The 1984 CICA changes were to be tested for three years. However, after 18 months, the protest provisions became permanent through other legislation.7

Administrative Protests. The vast majority of protests are filed in the administrative forums the GAO or the GSBCA. If a protest is filed in the agency before award, the government must suspend work on the procurement except in urgent and compelling situations. A protest generally can be filed at any time prior to the closing date for receipt of offers (e.g., challenging the fairness of a solicitation document) or within 10 days of contract award (e.g., challenging the award). If the protester wins, the government may be required to resolicit the requirement, reevaluate the offers, cancel the contract (if already awarded), or take other appropriate action. In many instances the protester is entitled to recover his bid or proposal preparation costs, as well as attorney fees.

These above-cited remedies were intended to protect disappointed bidders, but do so at the expense of the government. For example, while the government can be directed to pay a protester's legal fees, a protester cannot be assessed any penalty for delaying a govern-ment contract award or for the government defense against a frivolous protest. Avoiding delays in government programs is the current incentive for the government to painstak-ingly document procurement conformance with the many applicable statutes and regulations. However, this practice adds time to the procurement process and ultimately delays contract award and the delivery of goods and services that line managers critically need. Given the significant consequences of contracting officer decisions, a uniform standard for judging the correctness of those decisions is needed to ensure that accountable decisions are not second-guessed.
Further, the Report of the Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) reviewed the protest process. A key recommendation of this panel was that the Court of Federal Claims should be the single judicial forum to consider all protests that now can be considered by any District Court or the Court of Federal Claims.8 This change would allow expert judges of the Court of Federal Claims to resolve these sometimes complex contracting issues.

Actions

1. Establish a uniform standard of review for all protest forums by changing the standard of review at the GSBCA to conform to that used in the courts. (3)

The Federal Property and Administrative Services Act should be amended to change the standard of review at the GSBCA to mirror the judicial standard specifically, "was there a rational basis for the government action?"9

2. Allow penalties for frivolous protests. (3)

Legislation should be enacted to require protestors who tie up agency procurements by filing frivolous protests to pay respondents' costs and fees.

3. Establish a single forum within the judicial branch to consider protests. (3)

Legislation should be enacted to establish the Court of Federal Claims as the sole court with jurisdiction over bid protests filed in the judicial forums. The Court should retain the remedy scheme contained in the Equal Access to Justice Act.

4. Allow continued performance of contracting functions up to the point of contract award as part of any pre-award suspension of the delegation of procurement authority when a protest is filed with the GSBCA. (3)

Legislation should be enacted to amend the Federal Property and Administrative Services Act to make clear that any suspension as a result of a pre-award protest shall not preclude the agency head from continuing actions under the procurement that the agency head deems in the best interests of the United States, up to the point of award of a contract.

5. Identify costs to the government and contractors of responding to protests. (1)

By January 1994, the Chairman, GSBCA, and the Comptroller General should begin collecting and reporting annually the total cost to the government (e.g., GSBCA and other agencies) and other parties for protests. This will aid the General Accounting Office and GSBCA in measuring their performance in terms of providing an affordable means to resolve meritorious grievances.

6. Identify and eliminate causes of protests and improve agency processes. (1)

By November 1994, the Administrator, General Services Administration, and the Secretary, Department of Defense, should identify the top reasons for protests and provide to the Director, Office of Management and Budget (OMB), recommendations for changes in processes, including agency-level protest resolution, and procedures with the objective of significantly reducing the number of protests. The recommendations should be developed in consultation with a panel of suppliers and contracting officers.

Endnotes
1. Section 111 of the Federal Property and Administrative Services Act (40 U.S.C. 759 et seq.).
2. The Professional Services Council has noted that one clearly objective agency protest system is the Headquarters Level Protest Program of the Army Materiel Command (AMC). This alternative dispute resolution program has been very successful as a high-level agency review of bid protests. The filing times and procedures used by AMC were published in a set of AMC guidelines that are routinely included in AMC procurements. The AMC Pilot Program resulted in effective relief for protesters in approximately 20 percent of the cases filed. Only one AMC decision has been overturned by GAO since initiation of the HQ, AMC-Level Protest Program in April 1991. The Pilot Program has now been made permanent. The AMC procedures provide for 10 working days to file a protest from the date the affected offeror knew or should have known of the grounds for the protest, per FAR 33.103(b)(2). A protester to AMC also agrees not to file a protest at GAO, GSBCA, or any other forum while the AMC protest is pending. AMC review of the protest is made at the headquarters level and the decision is binding on the contracting officer.
3. Interview with Council for Excellence in Government members, May 11, 1993.
4. Broadbent, Steven W., Deputy Assistant Secretary for Information Systems, Department of the Treasury, "Urgent Need for ADP Procurement Reform," Government Workplace Products and Services Report (Fall 1990).
5. U.S. Merit Systems Protection Board, "Workforce Quality and Federal Procurement An Assessment," July 1992. This is the report of a follow-up survey by the Merit Systems Protection Board and the Office of Federal Procurement Policy of line managers on the federal procurement system.
6. Murphy, Robert, Senior Associate General Counsel for Procurement Law, General Accounting Office, and Judge Stephen Daniels, Chair of the General Services Board of Contract Appeals, speeches in the Daily Report for Executives (Professional Services Council, July 28, 1993).
7. Section 961(c) of P.L. 99-500. The Paperwork Reduction Reauthorization Act amended the Competition in Contracting Act (P.L. 98-369) to make the GSBCA protest authority permanent.
8. Aquisition Law Advisory Panel to the United States Congress, Streamlining Defense Aquisition Law (March 1993), pp. 1-214.
9. Federal Property and Administrative Services Act, 111 V (f)(1).

Contracting Agency
General Accounting Office
General Services Board of
Contract Appeals
District Courts
Court of Federal Claims
Administrative review to ensure actions were in keeping with policies, laws, and regulations.
Review to determine whether there is a violation of law or regulation, with presumption of correctness of the agency action and acceptance of agency's version of facts unless disproved.
Review to determine whether there is a violation of law, regulation, or delegation of procurement authority. The GSBCA gives due weight to the statutory goals of economic and efficient procurement with no presumption of correctness of the agency action (i.e., a de novo review).
Review to determine whether there was a clear violation of applicable law or regulation or no rational basis for the government action.
Review to determine whether there was a clear violation of statute or regulation or whether there was no rational basis for the government action.
Allows higher level management to have feedback on how contracting officials are performing. May not be seen as objective.
GAO has moved toward more formal proceedings, with the possibility of hearings.

1) De novo review allows GSBCA to review entire record anew; 2) it allows the GSBCA to, in effect, substitute its judgment for that of the contracting officer; 3) more effort is required to prepare and defend such a case; and 4) suspension of procurement freezes parties in place while GSBCA conducts its review.

Protesters must show that the government violated a statute that was created to protect their interests (e.g. Small Business Act).

Has nationwide jurisdiction, can conduct hearings around the country, and is more experienced in government contract issues as a result of its jurisdiction to resolve contract performance controversies.

PROC07:

Enhance Programs

for Small Business and Small Disadvantaged Business Concerns

Background

The federal government has a policy to place a fair proportion of its contracts with small business and small disadvantaged business concerns. It also has a policy to grant small business and small disadvantaged business concerns the maximum practicable opportunity to participate in performance of federal contracts as subcontractors.1 To implement these policies, the Small Business Act requires federal agencies to obtain small business subcontracting plans from prime contractors when the value of the procurement exceeds $500,000 ($1 million for construction) and offers subcontracting possibilities.2 This requirement also applies when contracting with state and local governments or with entities that are controlled or regulated by state and local governmental bodies (e.g., public utilities).

The Small Business Act requires the President to establish annual government-wide goals for procurement contracts awarded to small business and small disadvantaged business concerns. The governmentwide goal for participation by small business concerns must be established at not less than 20 percent of the total value of all prime contract awards for each fiscal year. As part of this, a goal for participation by small disadvantaged business concerns must also be established at not less than 5 percent of the total value of all prime contracts and subcontract awards for each fiscal year.3

The Small Business Set-Aside Program. A number of programs have been established to implement the policies and facilitate agency achievement of the above-cited goals. The most commonly used programs are the small business set-aside program, the 8(a) program, and the program for subcon-tracting with small business and small disadvantaged business concerns.4

The small business set-aside program authorizes agencies to reserve individual procurements exclusively for participation by small business concerns. The 8(a) program is a business development program adminis-tered by the Small Business Administration (SBA) for small businesses owned and controlled by socially and economically disadvantaged U.S. citizens. To participate, firms must apply and meet eligibility criteria. Program participation is limited to nine years. Participants may receive a variety of business development services including management and technical assistance, direct SBA loans, surety bond waivers, the transfer of government surplus property, and government contracts awarded under special procedures. SBA's subcontractors are referred to as "8(a) contractors." Federal agencies award contracts to SBA, which in turn subcontracts with eligible 8(a) firms either on a sole-source or competitive basis for performance of the agencies' work.

Small businesses awarded contracts under the small business set-aside and 8(a) programs are limited in the amount of subcontracting during the contract's term. For service and supply contracts, the small business concern must perform at least 50 percent of the cost of contract performance incurred for personnel with its own employees. For construction, small business general contractors must perform at least 15 percent of the contract cost, not including cost of materials, with their own employees. Small business special trade contractors must perform at least 25 percent of the contract with their own employees.5 In addition, small businesses must supply the product of another small business under the small business set-aside and 8(a) programs.

Other small business programs. In addition to the small business set-aside and 8(a) programs, which apply government-wide, the Department of Defense (DOD) has special statutory authority to conduct small disadvantaged business set-asides.6 Under the set-aside program, DOD has the authority to limit competition on a specific procurement exclusively to small disadvan-taged businesses. The program requires a self-certification that the offeror is a small disadvantaged business as defined in the Small Business Act. This certification may be challenged, but SBA precertification is not required.

Need for Change

The administrative burden imposed on small business by the limitation on subcontracting is enormous. Every quotation a small business obtains from a prospective supplier or subcontractor must be evaluated not only from a "make or buy" standpoint prior to contract award, but also from a large or small business supplier perspective. The small business must compare costs from each source and consider the expertise of the small business supplier to meet the requirements of the solicitation as a subcontractor, even if the large business supplier is a known acceptable source. The small business submitting an offer to the government must expend extra time locating sources in order to comply with the limitation on subcontracting, instead of selecting a supplier or service provider based on price or other factors important to that small business. This limitation is prejudicial to small businesses, as large businesses do not have to comply with such requirements.

Civilian agencies need authority to conduct small disadvantaged business set-asides because the 8(a) program does not encompass all small disadvantaged businesses. Some firms have graduated from the 8(a) program but still qualify as small businesses under the applicable size standard, while others have never applied to the 8(a) program. To the extent that these firms are not included in competitions for 8(a) awards, the procuring agency's options for cost and capability are limited. Procuring agencies need the flexibility to use either the 8(a) program or small disadvantaged business set-asides as means to achieve the statutory goals.

Federal agencies have difficulty getting subcontracting plans when contracting with state and local governments or entities they regulate. The problem is most prevalent in the monopolistic public utilities industry, where the federal government has few options to enforce the requirements for subcontracting plans. Currently, thousands of staff hours and dollars are expended annually debating the issue, trying to persuade utilities of the merits of the federal government's position, or otherwise litigating conflicts. For all the effort, few benefits accrue to the small business community.

Attempts to resolve the problem have been unsuccessful. Public utilities refuse to enter into contracts, insisting that the federal government can procure service under tariffs like every other customer. When the federal government does procure service under tariffs, many utilities insist they are not sub-ject to the requirement for a subcontracting plan because they do not have a contract with the federal government. Some utilities maintain this position notwithstanding written opinions from the General Accounting Office and the Department of Justice that the subcontracting plan requirements apply even in the absence of a written contract.

Additionally, utilities and state and local governments complain that the federal subcontracting plan requirements overlap with state or local laws requiring similar plans providing contracting opportunities for small and small disadvantaged business concerns.7 Utilities and state and local governments add that the overlap creates an unnecessary intrusion by the federal government on state and local affairs and a duplication of effort, paperwork, and reporting.

Resolution of these issues will help federal managers by allowing them to use their resources in more productive endeavors.

Actions

1. Repeal statutory limitations on subcontracting and substitute regulatory limitations to provide greater flexibility. (3)

The Small Business Act should be amended to repeal the limitations on subcontracting. Such limitations should be addressed by the Administrator, Small Business Administration, through regulations governing the small business status of offerors. Small business status should require a contractor to perform a significant proportion of the work and have manage-ment control over performance. A firm's status as a small business would be subject to self-certification, protest, and appeal procedures in size determinations by SBA.

2. Authorize civilian agencies to conduct small disadvantaged business set-asides. (3)

The Small Business Act should be amended to give civilian agencies the same authority that DOD currently has for establishing its own set-aside competitions. The legislative amendments should be structured to ensure the continued support of the 8(a) program by precluding agencies from reducing the number and dollar value of 8(a) contracts. Giving civilian agencies the same authority as DOD to seek small disadvantaged business participation has three benefits: (1) the federal manager has a wider range of choice on capability and cost, (2) agencies are in a better position to meet their 8(a) goals, and (3) small disadvantaged businesses potentially gain greater access to federal business.

3. Permit state and local governments to substitute descriptions of their own programs for subcontracting and exempt monopolies regulated by governmental bodies. (3)

The Small Business Act should be amended to:
* permit the substitution, by state and local governments acting as contractors, of a description of their own similar programs for otherwise required small business subcontracting plans, if the contracting officer determines the description satisfies the purposes of the plan; and
* exempt entities that are monopolies providing services under rates regulated by a federal, state, or local governmental body from providing the otherwise required plan.

By recognizing state and local government programs serving the same purpose as the federal subcontracting plan requirement, the federal government would eliminate duplication of effort, which results when various levels of government impose similar requirements having similar purposes. The requirement for the contracting officer to determine whether the description satisfies the requirement will protect the small business community at large.

4. Demonstrate the continued commitment to small and small disadvantaged businesses. (2)
The President should issue a directive that demonstrates the administration's continued commitment to ensure that a fair proportion of federal contracts and purchases will be placed with small and small disadvantaged businesses and that revisions to the procurement process should not adversely affect the ability of these small businesses to obtain a fair share of government procurements.

Cross References to Other NPR Accompanying Reports
Small Business Administration, SBA02: Improve Assistance to Minority Small Businesses.

Endnotes
1. Section 19.201 of the Federal Acquisition Regulation (48 CFR 19.201).
2. Section 8 (d) of the Small Business Act (16 U.S.C. 737(d)).
3. Section 15(g) of the Small Business Act (15 U.S.C. 644(g)).
4. Subparts 19.5, 19.7 and 19.8 of the Federal Acquisition Regulation (48 CFR 19.5, 19.7 and 19.8).
5. Section 921(c)(2) of the Defense Authorization Act of 1987, P.L. 99-661.
6. Section 1207(e)(3) of the National Defense Authorization Act for Fiscal Year 1987 (10 U.S.C. 2301 note).
7. U.S. General Accounting Office, Public Utilities Plans for Small and Disadvantaged Subcontractors, GGD-93-44 (Washington, D.C.: U.S. General Accounting Office, April 1993), p. 22.

PROC08:

Reform Information Technology Procurement

Background

The Brooks Act authorizes and directs the Administrator, General Services Administration (GSA), to coordinate and provide for the economic and efficient purchase, lease, and maintenance of automated data processing (ADP) equipment by federal agencies.1 The Act was passed in 1965 at the start of the era of large mainframe computers, when ADP was a new and highly specialized product controlled by a few large companies. The Act originally covered only contracts for ADP hardware. Amendments to the Act in 1986 broadened its coverage to include contracts for ADP software and support services. The Act was also expanded to cover any contracts that included an ADP component, except for certain contracts of the Department of Defense and contracts for telecommunications systems and services. The term "information resources management" refers to the management of agency information activities and resources, including the use of ADP and telecommuni-cations hardware, software, and services. The term "information technology" (IT) used in this report is the contemporary term describing ADP and telecommunications hardware, software, and services.

The Act authorizes GSA to delegate to other federal agencies its authority to procure IT. GSA normally delegates such procure-ment authority up to a total of $2.5 million for individual acquisitions of IT equipment and services. GSA sometimes makes exceptions based upon reviews of an agency's management of IT systems; exceptional delegations of up to $17.5 million have been made. Agency procurement requests above these levels are reviewed by GSA. GSA reviews about 700 agency requests per year.

GSA establishes governmentwide policy for the acquisition, management, and use of IT through the Federal Information Resources Management Regulation (FIRMR). The FIRMR requires agencies to analyze their IT requirements, identify possible alternatives, and justify all IT procurements over $50,000.2 Though the regulation states that the amount of justification and documentation should be commensurate with the cost of the IT item being acquired, agencies have over-interpreted the regulation to require significant amounts of paperwork to justify even simple acquisitions.

Need for Change

IT procurements in the federal government take too long. A sample of major IT procurements in one agency showed that the government acquisition lead time was 49 months for these procurements as compared to an estimated 13 months for similar procurements in the private sector (see diagram).3

As a result, IT resources that are being bought to support critical federal program delivery do not satisfy current business requirements because by the time the IT items are delivered they are out-of-date. They also cost too much for the value received.

Rapid and effective acquisition of IT resources is a vital ingredient of the effort to reinvent government. A recent Harvard study states, "Transformational change is being unleashed in organizational performance and service through use of IT resources." However, it further states that "agencies must typically work through procurement procedures that are widely felt to be costly, slow, and excessively detailed. Procurement is seen as a barrier to strategic IT use."4 These concerns are echoed in a second report representing a survey of senior federal IT management officials. The report notes that many of these officials feel that the "delays are so long, in fact, that they end up acquiring out-of-date products."5 Finally, the National Performance Review Accompanying Report Reengineering Through Information Technology emphasizes the importance of obtaining state-of-the-art IT resources in a timely and cost-effective manner and states, "Information technology provides the means to remove the barriers of distance, time, and physical location. It is key to a system of government wherein customers have timely and simplified access to federal, state, and local government services via easy-to-use information technology systems. Information technology is a strategic tool to integrate activities and remove duplication of effort among government agencies."6

Challenges confronting managers. The following seven major challenges confront federal managers as they attempt to acquire and integrate IT into the work environment.

1. The computer industry is in the middle of a transition from one that is characterized by highly specialized and unique (proprietary) products to an industry that will someday have products that are almost completely commercialized and interchangeable. The government's practices and policies must be altered to take advantage of this trend but also recognize that it is not yet complete. Although it is moving rapidly, the industry still exhibits significant unique characteristics.

2. According to reports issued by such organizations as the General Accounting Office (GAO), GSA, and the Inspectors General (IGs) of certain agencies, the government has major problems acquiring complex IT products and services.7 These include failure by agencies to clearly define their requirements, failure to reengineer existing systems for rational and efficient processes before beginning automation, inadequate leadership on IT procurements by agency management, inadequate linkage of IT strategies to agency strategic plans, and other management failures. GSA, GAO, and private organizations agree that techniques of good management must be part of sound plans to manage IT procurements. These include mobilizing the right team, clearly defining requirements, tying IT procurement strategy to overall agency strategy, providing strong senior management support, and automating systems only when they have been reengineered for maximum efficiency.

3. The law and the Federal Information Resources Management Regulation (FIRMR) fail to recognize that many IT resources are "commodities" commercial products and services mass-produced and offered for sale, lease, or license on the open market. System conversion, obsolescence management, interoperability, process reengineering, security, and other IT issues important in large procurements need not be emphasized for small IT procurements. Many of the smaller dollar acquisitions are for commodities readily available in the marketplace. The laws and regulations underlying IT acquisitions do not currently differentiate between acquisition of commodity and non-commodity items or products.

4. The federal acquisition process is so time-consuming that it fails to keep pace with technology. The federal acquisition cycle is estimated to be more than three times longer than that of private industry. While comprehen-sive lead time data is not collected, studies by Treasury, the General Services Administration, and Harvard University and incidental reports indicate that this is due to lengthy agency reviews with unnecessary rules and procedures, excessive documentation of transactions to forestall protests before the GSBCA, time added by GSA review of large agency procurement requests, and the existence of FIRMR provisions that duplicate agencies' normal IT acquisition planning procedures.8

5. Some IT procurements involve benefits that transcend the mission of a single agency, such as volume discounts from large purchases, learning the lessons and best practices of other agencies, and understanding common technology issues underlying multi-program activities (e.g., "one-stop shopping" efforts to provide services across agency lines). Agency acquisition planning must include outreach to, and teamwork with, other agencies where an acquisition produces such benefits.

6. The party responsible and accountable for good management of agency programs, including IT acquisitions, should be identified clearly and unambiguously.

7. Although computer products and services have taken on many characteristics of a commodity i.e., many suppliers, highly competitive pricing, similar features, etc. they also have unique characteristics that make them quite different from TVs, VCRs, calculators, or refrigerators, to name a few other products currently classified as commodities. Their primary differentiating characteristics are:

* continued rapid advance of technology and continuous lower production costs, and therefore continuously lower prices decreasing 20 to 40 percent per year; and

* rapidly changing technology affecting form, fit, and function,which yields much higher performance for much lower costs.

GSA strives to meet these challenges through innovative training programs, an aggressive triennial review program of agency IT management capabilities, sponsorship of various forums, and cooperation with concerned agencies. However, the problems continue. There is reason to doubt that any central management agency, no matter how excellent, can solve problems that are essentially institutional problems.

Information technology evolution is so rapid that a continuous influx of talent and state-of-the-art knowledge is necessary if any central management organization is to handle the role GSA currently plays. Given scarce resources and the limitations in pay and personnel management practices inherent in the federal government, it is unlikely that such a central management organization could amass and continually replenish the talent required to guide agency procurements.

Actions

1. Establish an interagency team to develop a plan for improving federal information technology (IT) acquisitions. (1)

By December 1993, the Administrator, General Services Administration (GSA), should establish an interagency team to develop a governmentwide approach to improve management of IT acquisitions. This effort should operate within the overall context of IT reinvention activities within the federal government. The team should function as a sub-element of the Government Information Technology Services Working Group.9 The team should:

* review agency IT program plans, goals, and objectives by March 1994, and recommend specific delegations;
* act on behalf of all agencies with the goal of obtaining their agreement to work within the team's recommendations;
* be chaired by an agency team member who will report the team's findings and recommendations to the Administra-tor, GSA;
* be composed primarily of senior agency management officials able to consult with IT officials, private sector experts, Congress, and central management agencies (OMB, OFPP, NIST, etc.) to analyze issues and develop guiding principles, best practices, and performance measures for a streamlined, well-managed IT acquisition process;
* develop an interagency team approach for managing those IT procurements that have potential effects beyond a single agency;
* review GSA's ongoing role in IT with the goal of placing maximum accountability for IT with agency heads and emphasizing GSA's role and capability of being a "center of expertise," providing acquisition consultation and management services consistent with current law; and
* examine the issue of commodities to define better the boundary between acquisitions that do and do not need special authority and oversight in the law and the FIRMR. This includes advising the Administrator, GSA, prior to January 1994, regarding the pilot identified in action item 4, below.

By April 1994, the Administrator, GSA, should provide the Vice President with the team's findings, recommendations, and plans for implementation.

2. Increase IT delegation of authority to agencies. (1)

By May 1994, the Administrator, GSA, should change agency delegation amounts for competitive procurements based on the interagency team's recommendations. It is possible that agency delegations may be reduced, but more probable and expected that some agencies will receive greater or unlimited delegations while other agencies will receive delegations as follows.
* For agencies with information technology budgets reported to the Office of Management and Budget (OMB) under Circular No. A-11, section 43, information technology exhibits 43A and 43B, over $1 billion in the prior fiscal year: $20 million.
* For agencies with information technology budgets reported to the Office of Management and Budget (OMB) under Circular No. A-11, section 43, information technology exhibits 43A and 43B, from $100 million through $1 billion in the prior fiscal year: $10 million.
* For agencies with information technology budgets reported to the Office of Management and Budget (OMB) under Circular No. A-11, section 43, information technology exhibits 43A and 43B, from zero through $100 million in the prior fiscal year: $5 million.
GSA should cooperate with agency heads to ensure that these delegations are passed through to operating components and line managers with minimum restrictions and with an emphasis on expected performance outcomes and measures of success.

It is very important to increase delegation authorities and revise the FIRMR rules to more accurately reflect and take advantage of the commodity-like characteristics of computer products, services, and software.

It is also still essential to have a "center of expertise" that can keep track of rapid changes in technology and performance, ensure that the types of relationships with the American computer industry provide vehicles to maximize the advantages to government of their capabilities; and ensure that the agencies with delegated authority have necessary skills, management controls, and motivations to take maximum advantage of what American industry can offer. The "center of expertise" probably best fits in GSA and would fit into a broad mandate of the existing law. One of the primary tasks of the interagency team (referred to in action item 1) would be to develop a plan to enable the above transition to happen as easily as possible.

3. Eliminate requirements and alternatives analyses for commodity IT acquisitions. (1)
By December 1994, the Administrator, GSA, should, on an interim basis, authorize a waiver from the Federal Information Resources Management Regulation provisions on requirements and alternatives analyses for individual competitive acquisitions of commodity IT resources valued under $500,000 for products and $2.5 million for services over the life of the contract. This change recognizes that risk and complexity are greatly reduced in these smaller IT acquisitions and this additional paperwork and compliance with current regulations is unnecessary.

4. Pilot test alternatives for commodity IT acquisitions. (1)

Beginning December 1993, the administrator, GSA, should commence a two-year pilot for excluding commodity products and services from coverage by the Federal Information Resources Management Regulation. The definition of "commodity" to be used in the pilot should be developed in consultation with appropriate congressional officials, the interagency task team recommended above, and industry.

5. Identify and test innovative procurement strategies that reduce the costs for IT items. (1)
By January 1994, the Administrator, GSA, should identify and begin pilot testing alternative procurement strategies to achieve greater cost savings and efficiencies for IT items. The goal of the procurement strategies would be to buy more IT items for the same or less cost.

Cross References to Other NPR Accompanying Reports
Reinventing Support Services, SUP04: Streamline and Improve Contracting Strategies for the Multiple Award Schedule Program.
Reengineering Through Information Technology, IT01: Provide Clear, Strong Leadership to Integrate Information Technology into the Business of Government, and IT11: Improve Methods of Information Technology Acquisition.

Endnotes
1. Section 111 of the Federal Property and Administrative Services Act (Title 40 U.S.C. 541 et seq.)
2. Sections 201-20.1 and 201-20.2 of the Federal Information Resources Management Regulation (41 CFR 201-20.1 and 201-20.2)
3. U.S. Department of the Treasury, Internal Revenue Service, Management Review of the Contracts and Acquisition Division (Washington, D.C., 1990).
4. John F. Kennedy School of Government, Information Technology and Government Procurement: Strategic Issues for the Information Age (Cambridge, MA: Harvard University, 1992).
5. See Key Issues in Federal Information Technology (Arlington, VA: Information Technology Association of America, 1992).
6. See National Performance Review Accompanying Report, Reengineering Through Information Technology (Washington, D.C.: U.S. Government Printing Office (GPO), September 1993).
7. See John F. Kennedy School of Government; General Services Administration, Critical Success Factors for Systems Modernization: A Primer for Senior Managers in Government (Washington, D.C., undated); U.S. General Accounting Office, Meeting the Government's Technology Challenge, IMTEC-90-23 (Washington, D.C.: U.S. General Accounting Office [GAO], 1990); U.S. General Accounting Office, ADP Procurements: GSA Needs to Improve its Review Process to Enhance its ADP Oversight, IMTEC-92-7 (Washington, D.C.: GAO, 1991); U.S. General Accounting Office, Perceived Barriers to Effective Information Resources Management: Results of GAO Panel Discussions, IMTEC-92-67 (Washington, D.C.: GAO, 1992); and President's Council on Management Improvements, Managing the Risk and Uncertainty of Technological Change (Washington, D.C., 1990).
8. General Services Administration, Go for 12 Program: A Report on Testing of Parallel Review Concepts in the Acquisition Process (Washington, D.C., 1987), and see John F. Kennedy School of Government.
9. See "IT01: Provide Clear, Strong Leadership to Integrate Information Technology into the Business of Government," National Performance Review Accompanying Report, Reengineering Through Information Technology (Washington, D.C.: U.S. GPO, September 1993).

Center Authority and Accountability

with Line Managers

Introduction

Procurement professionals need to work with, not against, the line manager to meet mission goals. Managers should have the ability to acquire many of the tools needed to do their job without going through a procurement office. This can be accomplished by allowing line managers to expand their use of commercially available purchase cards. Procurement professionals also need to focus more on understanding the customer's needs. The effectiveness of procurement organizations needs to be measured by results, as well as compliance with rules and regulations. We should achieve this by:
* expanding the use of commercial purchasing cards,
* focusing procurement people and organizations on customer needs and expectations, and
* streamlining procurement ethics laws.
The background, need, and details of each of these actions is presented in this section.

PROC09:

Lower Costs and Reduce Bureaucracy in Small Purchases Through the Use of Purchase Cards

Background

In most federal agencies, employees have two ways to obtain needed goods and services. They can either submit a procurement request to a contracting officer or go to a central stockroom. Managers are frustrated because the cost of paperwork to obtain the items often exceeds the cost of the item, the process is very time-consuming, and they must go through procurement personnel to buy even simple, small-dollar items. A more efficient method is the use of a commercial purchase card service available through a General Services Administration (GSA) contract.1 The use of the purchase card is particularly effective for acquiring small amounts of supplies or services. For example, a manager or a procurement official can quickly acquire a single, fully equipped personal computer, software, and related supplies using the purchase card.

Currently, federal agencies may choose to participate in the purchase card program. Under the program, authorized federal employees (including line managers) may use a commercial purchase card to pay for goods and services bought on behalf of the federal government. The card, called IMPAC (International Merchant Purchase Authorization Card), is recognized internationally and is accepted wherever the Visa card is accepted. Within the govern-ment, GSA is now the only supply source that accepts IMPAC. The card is used for purchases or for payments to settle outstanding contracts. The latter use is a less expensive alternative to traditional invoicing procedures.

A very effective system exists to ensure accountability in the use of the card. The card is restricted to purchases and payments of less than $25,000, which by law are treated as small purchases. IMPAC may not be used to obtain cash advances. Average total purchases under the IMPAC program are $1.7 million per day. However, IMPAC can handle significantly larger volumes. The average individual purchase is $271. A fraction of a percent of all invoice amounts is currently charged to the government under the IMPAC contract. However, GSA is looking to reduce these costs by recompeting the contract with a provision for the successful contractor to provide the government with a rebate based on the total amount of purchases made on the card.

IMPAC payments are processed using the same procedures established for holders of standard Visa cards. The employee signs the sales draft and receives a copy. Merchants receive prompt payment through Visa's international settlement system. Various daily, monthly, and quarterly reports are available to the government so that use of the cards can be monitored and controlled. Card holders receive monthly statements to verify billings. After the billings on a particular statement are verified by the card-holding employee, the statement is independently reviewed for approval before being sent to the agency's finance office for payment.

Many agencies do not permit the use of IMPAC or heavily restrict its use, thereby making it impossible for most managers to use the card. Agencies that do use IMPAC determine the employees who get the cards and set limits on the types and amounts of small purchases that can be made by each employee. In some cases, agencies place spending limits directly on their IMPAC accounts.

Need for Change

The reasons to expand the use of IMPAC are significant. First, nearly all managers complain about the inability to get basic office tools on a timely basis. For example, if a manager has a need for commercially available personal computers and software for a special project or for a new employee, the manager should be able to get it quickly to satisfy the need. The use of the purchase card would be especially helpful here.

Second, using IMPAC will result in major cost savings to the government and the taxpayers. Its use should virtually eliminate the paperwork normally required in preparing a purchase order and processing a government invoice. This is significant when applied to the 11 million purchases the government makes annually under the simplified acquisition procedures. If only 50 percent of all small purchase transactions made annually are done using the purchase card, a conservative estimate is that $180 million can be saved annually in federal administrative costs. Moreover, IMPAC costs less than traditional methods of making small purchases. The General Accounting Office estimates that using the purchase card instead of a purchase order saves between $29 and $227 per transaction.2 These savings are significant and achievable.

Third, use of IMPAC enables managers to better manage cash, control funds, and reduce the cost of keeping imprest (petty cash) funds on hand. The reports of IMPAC activity permit careful tracking of the amount, type, and timing of small purchases. All transactions under IMPAC are more readily verified through a consolidated review, approval, and payment process. This permits managers to carefully and efficiently verify the transaction, receipt, and dollar value of every small purchase while eliminating the paperwork burdens and controls that imprest funds require.

Actions

1. Provide managers with the ability to authorize employees who have a bona fide need to buy small-dollar items directly using a purchase card. (1)

By May 1994, the heads of all federal agencies should ensure that managers are able to make small purchases directly through the IMPAC program. In addition, they should:
* direct their respective comptrollers and procurement executives to adopt internal procedures to govern the use of IMPAC; such procedures should provide for dealing with fraud or misuse swiftly and sternly and provide assurance that small and small disad-vantaged businesses and mandated sources of supply are accorded all statutorily required considerations in use of the purchase card;
* ensure that anyone authorized to use the purchase card has appropriate training in simplified acquisition procedures and in small business and small disadvantaged business programs;
* encourage vendors who do not accept IMPAC to make arrangements to do so and provide information on how they can register for the program;
* direct contracting activities to review IMPAC purchases to identify high-dollar aggregate purchases from individual merchants so they can negotiate discounts with these vendors;
* limit internal procedures to those necessary to ensure the maximum effective use of IMPAC; and
* reduce the number and use of imprest funds in favor of IMPAC to save money through improved cash management.

2. Encourage all government supply sources to accept the purchase card. (1)

By May 1994, the heads of all agencies operating as government supply sources (Federal Prison Industries, Defense Logistics Agency, Department of Veterans Affairs, etc.) should start accepting IMPAC. In order to do so, the agencies must establish themselves as merchants under the IMPAC program.

3. Amend the Federal Acquisition Regulation (FAR) to promote use of the purchase card. (2)

By April 1995, the Federal Acquisition Regulatory Council should amend the Federal Acquisition Regulation (FAR) to promote and facilitate the use of purchase cards in making small purchases and ordering off of established contracts. The implementing regulation should also reduce paperwork to the absolute minimum amount necessary when using the purchase card.

4. Amend Department of the Treasury regulations to authorize the use of the purchase card for cash advances. (1)

By May 1994, the Secretary, Department of the Treasury, should amend regulations to authorize use of the purchase card for cash advances. The authorization should be limited to employees who currently serve as imprest fund cashiers. The card should be coded so only authorized employees many obtain cash advances. These employees could go to a local bank to obtain cash as needed instead of holding cash in imprest funds and filing vouchers to replenish the imprest fund. Documentation for cash expenditures can be processed as a normal part of the monthly reconciliation and payment of the purchase card bill. This will improve cash management and reduce paperwork and administrative controls associated with maintaining imprest funds.

Cross References to Other NPR Accompanying Reports
Reengineering Through Information Technology, IT11: Improve Methods of Information Technology Acquisition.
Improving Financial Management, FM08: Reduce Financial Regulations and Requirements.

Endnotes
1. GSA Schedule Number IG 615, Governmentwide Commercial Credit Card Service, July 28, 1992.
2. U.S. General Accounting Office, Cash Management, Benefits, and Limitations of the Small Credit Card Program, AFMD-90-89BR (Washington, D.C.: U.S. General Accounting Office, September 1990), p. 28.

PROC10:

Ensure Customer Focus in Procurement

Background

In most federal agencies, an internal office assesses procurements by utilizing a variety of review activities, including Procurement Management Reviews (PMRs). A 1982 executive order directs agency heads and procurement executives to implement effective procurement systems.1 It also requires agency procurement executives to evaluate the performance of the agency's procurement system against specific criteria and certify that such criteria have been met. System criteria guidelines were established by the Office of Federal Procurement Policy (OFPP) in 1984 and were intended to serve as guides for agencies in establishing and reviewing their procurement systems. While the system criteria established by OFPP address the effectiveness and efficiency of the system, they tend to focus on the process as opposed to the outcomes of procurements. The criteria fail to reflect the reinventing principles advocated by the National Performance Review, including a focus on results for the line manager.

Need for Change

An ever-growing body of rules and regulations has emerged as the government has tried to reduce the incidence of fraud and prevent waste of taxpayer dollars. An OFPP survey of federal line managers indicates that many managers believe procurement professionals focus on meeting process requirements and rules at the expense of fast and reliable service, quality results, and customer needs. The survey also documents considerable miscommunication and lack of trust between line managers and procure-ment professionals, a further impediment to effective procurement programs.2

The OFPP survey supports the conclusion that customer input should be considered in measuring the effectiveness of procurement services. The goal of procurement organiza-tions is to provide quality supplies and services required by users when they are needed, at a reasonable price, and in accord-ance with applicable laws and regulations. Line managers the customers should determine quality and timeliness, not the procurement organization that supports them. Compliance with laws and regulations should be one criterion in assessing the effectiveness of procurement services, but so too should customer input regarding the quality and timeliness of services provided.

Some agencies have recognized the importance of and need for considering customer input. For example, one procurement organization within the Department of Commerce is establishing a board of directors, composed of senior-level customers, to rate the procurement organization against mutually agreed-upon standards.3 The National Aeronautics and Space Administration now includes customer input as one of its PMR elements.

Good customer relations will restore balance to the contracting officer's basic role of providing excellent customer service within the limitations of law and regulations. Customer-oriented procurement programs will refocus attention from the means to the ends.

Action

Revise Executive Order 12352 to conform to the new vision for federal procurement. (2)

Cross References to Other NPR Accompanying Reports
Creating Quality Leadership and Management, QUAL02: Improve Government Performance Through Strategic and Quality Management.
Streamlining Management Control, SMC03: Change the Focus of the Inspectors General, and SMC05: Improve the Effectiveness of the General Accounting Office Through Increased Customer Feedback.
Endnotes
1. Executive Order 12352, "Federal Procurement Reforms," March 17, 1982.
2. Merit Systems Protection Board and Office of Federal Procurement Policy, January 1993.
3. U.S. Department of Commerce, Office of the Secretary, Office of Procurement Operations.

PROC11:

Improve Procurement Ethics Laws

Background

Integrity and accountability are two fundamental principles of the federal acquisition process that cannot be compromised. The laws and regulations governing government and contractor behavior must be clear and understood by all affected parties and the consequences must be severe for breaches of improper behavior.

Under current laws, procurement officials and contractors are required to sign integrity certifications that identify a number of ethics provisions, including prohibitions against the disclosure of information and post-employment restrictions. Those who violate these statutory prohibitions are subject to a maximum period of imprisonment of five years, as well as criminal and civil fines.

Need for Change

The need for procurement ethics standards is best illustrated by the Pentagon "Ill Wind" investigations, which revealed many instances where individuals or companies were trafficking in procurement-sensitive information. Such conduct undermines the integrity of the federal procurement process and can result in increased contract costs. When those competing for government contracts are not treated fairly, or perceive their treatment as unfair, the government pays more than it would otherwise pay for products or services. Contract costs are increased because the government may be deceived into selecting a company or individual who does not provide the best value or performance. Also, percep-tions of unfair treatment can cause contractors to decide not to compete for certain procurements, thus depriving the government of lower contract costs that otherwise would result from increased competition.

The procurement integrity laws include provisions to protect certain procurement-sensitive information (i.e., proprietary and source selection information) from improper disclosure. But they do not provide clear guidance because of their complexity and the difficulty of applying their restrictions to particular procurements. For example, the statutory definitions are so confusing as to when a procurement has begun or who is a procurement official or a competing contractor that those individuals who must follow these rules do not always know when they apply or whether they are violating a specific provision.

Impediments to Open Communications Between Buyers and Sellers. The procurement integrity laws have also had a chilling effect on legitimate and necessary discussions and exchange of information between contractors and federal agencies. In the commercial world, customers expect suppliers to provide them with valuable information regarding new product or service offerings, as well as to suggest solutions the supplier can provide to customer problems. Government customers should be able to gain the benefits of such information. However, the Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law, known as the Section 800 Panel, found that despite their laudable objectives and purpose, the provisions of the procurement integrity laws seem to have generated more uncertainty and anxiety in the procurement community. By virtue of their complexity and the severity of the penalties for noncompliance, the information disclosure restrictions have imposed what some have characterized as a "code of silence" on both government and industry personnel during the course of a procurement. The former have often feared to offer and the latter feared to seek even the most routine information without specific authorization or, frequently, legal guidance.

The Section 800 Panel quoted a senior NASA official who stated that "if there is any doubt about whether a document or information should be discussed during a source selection, it does not get communicated. To guard against the enormous penalties for error, some corporations and government activities are said to have furnished their representatives with ÔMiranda cards' that coach them through a litany of preliminary questions each ought to ask the other before safely addressing the business at hand."1

Increased costs for certifications. The procurement integrity laws also contain certification requirements that increase government costs and provide questionable value in return. A lesson learned from the Ill Wind investigations was that the conduct prosecuted was conscious, deliberate, and in some cases highly sophisticated criminal behavior. Such deliberate criminal conduct is unlikely to be deterred by the risk of additional penalties for false certification statement violations or detected as part of the certification process. But these measures are certain to mean higher costs for the government.

Contract prices and agency administrative costs are increased by the need to obtain procurement integrity certifications from the thousands of contractors and agency employees who participate in procurements. For example, in at least four sealed bid procurements at the General Services Administration (GSA), the low bidder forgot to sign the certificate and GSA was forced to accept the next lowest bidder who had signed the form.2 GSAincurred the increased costs of going to a higher priced bidder, not because there was any wrongdoing, but because the rules regarding sealed bids did not allow GSA to let that low bidder come back and sign the form. In one of these four cases, the first, second, and third lowest bidders all forgot to sign the form and GSA was forced to go to the fourth lowest bidder. The original low bid was $109,777, and the fourth lowest bid was $133,000.3 The government paid $23,233 more than it should have because of this provision. The costs to the government and taxpayers are significant because GSA's experiences are not unique; they typify the governmentwide experience.

Post-Employment restrictions. Finally, a problem exists with the procurement ethics laws regarding post-employment restrictions. The accumulation over time of several duplicative post-employment (revolving door) provisions applicable to agency employees who participate in procurements has resulted in considerable confusion. In this regard, the Director of the Office of Government Ethics (OGE) stated, "Little by little, rule by rule, we have addressed a problem here and a problem there with a quick statutory fix, stacking one on top of another until we have reached a point today that an employee who sincerely wants to do the right thing simply cannot understand what it is he has to do to comply."4

A solution. The Office of Federal Procurement Policy (OFPP) and OGE have proposed revisions to the ethics laws through their legislative proposal jointly submitted to Congress in 1990 and 1991.5 This proposal addresses the issues and problems described above and strikes a proper balance between safeguarding the public against conflicts of interest and deterring qualified people from entering public service, while at the same time removing administrative impediments and barriers to effective communication between government and its business partners.

Action

Strengthen and simplify procurement ethics laws. (3)

Current ethics laws should be amended to:
* make them consistent govern-mentwide;
* increase penalties from 5 to 15 years for the disclosure or receipt of certain sensitive source selection or proprietary information, thus placing prohibition of such conduct on a par with the crime of bribery of public officials, which carries a maximum sentence of 15 years;
* eliminate the procurement integrity certifications that increase government administrative and contract costs while adding little or no deterrence value;
* add a new provision to the govern-mentwide post-employment (revolving door) law that would prohibit former government employees from using certain procurement-sensitive information to represent, aid, or advise others for one year after government service, and eliminate several overlapping or duplicative statutory provisions; and
* eliminate the certification requirement for purchases under the simplified acquisition threshold.
These changes would strengthen and streamline current ethics laws by more effectively punishing deliberate offenders, providing clearer guidance on procurement ethics, reducing unnecessary contract and agency administrative costs, and removing administrative barriers to effective communication between government and private sector vendors.

Endnotes
1. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law, Executive Summary (January 1993), pp. 6-127-129.
2. Section 27 of the Official Federal Procurement Policy Act, Procurement Integrity, 41 U.S.C. 423.
3. GAO Protest Decisions:
a. Hein-Werner Corporation, B-247459, 92-1 CPD 484, June 2, 1992.
b. Atlas Roofing Company, Inc., B-237692, 90-1 CPD 216, February 23, 1990.
c. Emjay Engineering and Construction Co., Inc., B-24360, 91-1 CPD 590, June 21, 1991.
d. Sunbelt Industries, Inc., B-245244.2, 91-2 CPD 279, September 24, 1991.
4. U.S. Congress, House, Committee on Armed Services, Subcommittee on Investigation, "Revolving Door Issues and Post-Employment Restrictions," testimony by Stephen D. Potts, May 9, 1991.
5. The Procurement Ethics Reform Act, 2775, submitted to the 101st Congress on June 20, 1990, and resubmitted to the 102nd Congress on February 14, 1991, introduced as 458 on February 21, 1991.

Create Competitive

Enterprises

Introduction

Line managers must have expanded access to competitively priced supplies and services. The procurement system seeks to foster "full and open competition." Competition is perhaps the most powerful means available for keeping suppliers efficient and responsive. To support line managers effectively, the procurement system should, to the fullest extent possible, offer competitively priced supply sources.

One effective way to do this would be as suggested in our proposed action to open federal, state, and local governmental supply schedules to use by all government agencies and to cooperate on other procurement needs. The details of this idea are presented in this section.

PROC12:

Allow for Expanded

Choice and Cooperation

in the Use of Supply

Schedules

Background

Consolidated government procurement actions tend to maximize the economic advantage of volume buying with lower costs for the taxpayer. Currently, governments at various levels cannot enter into arrangements to consolidate their procurement requirements and then place orders under one another's contracts. In addition, federal grantees and qualified nonprofit agencies for the blind and others with severe disabilities, which are awarded government contracts under the program operated by the Committee for Purchase from People who are Blind or Severely Disabled, are not authorized to use federal supply services.

The federal government supply sources, such as the Defense Logistics Agency (DLA), the General Services Administration (GSA), and the Department of Veterans Affairs (VA), consolidate the requirements of various federal agencies for procurement purposes. As a result, these procuring agencies secure price advantages from volume buying. In certain circumstances, it is to the federal government's advantage to use supply sources established by state and local governments.

Federal government supply sources are currently authorized to procure and supply personal property and non-personal services for the use of executive agencies, mixed-ownership government corporations,1 the District of Columbia, the Senate, the House of Representatives, the Architect of the Capitol, and certain other organizations authorized by law to use federal supply sources. However, they cannot acquire items for state or local governments, nor may federal agencies use state or local supply sources.

Federal agencies must acquire certain supplies and services from qualified nonprofit agencies for the blind or others with severe disabilities approved by the Committee for Purchase from People who are Blind or Severely Disabled.2 Normally the contracts with these nonprofit agencies are fixed-price contracts. The Federal Acquisition Regulation (FAR) provides that agencies may authorize certain contractors (generally cost-reimbursement contractors) to use government supply sources if it is in the government's interest to do so.3

Need for Change

Federal managers will benefit if they have the option of entering into arrangements with state and local governments to consolidate requirements for procurements under a single contract.

One recent example involving the Department of Veterans Affairs demonstrates the potential benefits. A state Veterans Home was constructed on the federal VA Medical Center site in Albany, New York. This provided veterans with convenient access to both VA and state medical facilities. Even though the state home was located on federal property, the VA and the state could not consolidate their common service requirements under one contract. Both VA and the state had to enter into separate contracts for services such as snow removal, trash removal, and laundering. As a result, the VA and state were unable to achieve the cost efficiencies that would have resulted from single contracts.

Allowing governments at various levels to enter into agreements to use one another's contracts represents a win-win situation for the governments and the taxpayers. Governments at all levels will reduce administrative staffs and costs if they are authorized to use one another's contracts. In addition, all levels of government will be able to negotiate better prices as a result of the increased volume of sales under the contracts. Contract consolidation will be particularly beneficial to governments in the areas of new technology, such as alternate fuel vehicles, energy-efficient computers, and products containing recycled material. Governments at all levels would have a greater impact on the marketplace and could acquire products and services at lower cost.

If grantees could use federal supply sources, specifically the Multiple Award Schedules, they would be able to do more with the funds provided to them through the grant. Similarly, nonprofit agencies awarded contracts under the program administered by the Committee for Purchase from People who are Blind or Severely Disabled would be able to reduce the cost of the supplies or services provided to federal agencies under such contracts if they were able to acquire the supplies used to produce the item or service at a lower cost. The workforce and procurement systems are already in place at the federal level to accomplish this.

Actions

1. Allow state and local governments, grantees, and certain nonprofit agencies to use federal supply contracts. (3)

State and local governments (including Indian tribal governments), grantees, and nonprofit agencies awarded contracts under the program administered by the Committee for Purchase from People who are Blind or Severely Disabled should be authorized to use nonmandatory federal contracts as sources of supply or services. Grantees and nonprofit agencies should only be authorized to use federal supply sources (e.g. nonmandatory Multiple Award Schedules) if authorized by the federal agency awarding the grant or contract. In addition, they could only use or acquire items to be used in direct performance of the grant or contract. The use of federal contract sources would be optional for all these non-federal entities.

2. Allow federal agencies to enter into agreements to share state and local government supply sources. (3)

Federal agencies should be authorized to enter into agreements to allow the federal government to use contracts awarded by state or local governments when it is cost-effective to do so. Such agreements should ensure federal social and economic policy goals are properly considered.

Endnotes
1. Government Corporation Control Act (31 U.S.C. 9101).
2. Javits Wagner O'Day Act (41 U.S.C. 46-48c).
3. Part 51, Federal Acquisition Regulation (48 CFR Part 51).

Foster Competitiveness, Commercial Practices, and Excellence in Vendor Performance

Introduction

The government market, while large, is not as dominant as it once was. It can no longer mandate special practices and treatment if it desires commercial items at competitive prices. In general, citizens and services will benefit most by aligning government procurement practices with those of the commercial sector, especially with the worldwide movement to electronic document interchange and electronic commerce. The government will benefit by reduced product costs and faster product delivery.

To foster competition, commercial practices, and excellence of vendor performance, we should:
* foster reliance on the commercial marketplace,
* expand electronic commerce,
* encourage best value procurement,
* promote excellence in vendor performance,
* authorize a two-phase competitive source selection process,
* authorize multiyear contracts,
* apply certain statutory requirements governmentwide, and
* streamline buying for the environment.
The background, need, and details of each of these actions is presented in this section.

PROC13:

Foster Reliance on

the Commercial Marketplace

Background

Line managers often have difficulty acquiring items commonly sold in the commercial marketplace because the federal procurement system generally relies on complex, rigid rules and procedures, excessive paperwork, detailed design specifications, and in-process inspections and audits to buy goods and services. To make matters worse for the government, some contractors feel pressured to separate their government production facilities from their commercial facilities to minimize the burden of government regulations as they compete in the world marketplace. The IBM Federal Systems Company is a good example; it provides quality products and services to the federal government, yet federal agencies cannot normally buy from commercial IBM companies that serve other large private sector businesses.

Controls on buying unique items developed for the federal government help ensure accountability, but are costly when applied to commercial products. The Center for Strategic and International Studies (CSIS) reports that it costs five times more to bid on a government requirement than on a commercial job. Once a contractor has obtained a government contract, it costs that contractor three times its usual administrative expenses to comply with government controls.1 For example, the Defense Science Board found that integrated circuits built to military specifications cost the government up to 15 times as much as better circuits cost private buyers.2

Need for Change

Fostering reliance on the commercial marketplace should result in substantial savings to the government and its business partners. The current cost to industry of doing business with the government is high. A recent study done for the Defense Systems Management College indicates the added costs for all federally imposed requirements range up to 12 percent or more of total contract costs, depending on the contractor and the individual contract.3 While it is difficult to accurately estimate the savings that will accrue from greater reliance on the commercial marketplace, it is clear that the potential for savings is significant. Should savings of only 1 percent annually occur in total federal purchases of equipment and supplies, up to $700 million in savings per year could be passed to the government and taxpayer.4

The Use of Government Specifications. When the government contracts with commercial vendors, it sometimes imposes extensive detailed requirements. Take, for example, the Department of Defense's solicitations for bed pillows, cleaning cloths, and automotive drain pans. The specifica-tions for these items are contained in 14, 14, and 8 pages respectively.5 Such requirements are often unlike anything a commercial firm includes in its contracts for commercial supplies. To help reduce the effect of these impediments and increase the use of commercial items, Congress directed the Department of Defense to prepare a simplified uniform contract.6 However, even a simplified contract may contain about 100 clauses, due to statutory requirements, with the average solicitation containing 30 to 70 clauses.7

The report Streamlining Defense Acquisition Law by the Acquisition Law Advisory Panel to the United States Congress (known as the Section 800 Panel) addressed this problem and recommended changes in statutes.8 The Panel identified 889 provisions of law related to defense acquisition and found that many of the statutes create barriers for commercial firms because they disrupt established manufacturing methods, sources of supply, and personnel practices. When the commercial item is on the shelf and the government asks a firm to certify it has used special sources for components, the firm cannot easily do so. To build a new item using government-required practices is generally not economical for the government or the firm, especially if it is a small business.

Where the size of the procurement is suitable to pay a contractor to apply contract provisions unique to the government, it costs the contractor, and eventually the govern-ment, more money. Any burdens the government imposes on U.S. suppliers affects the competitiveness of U.S. industry, because such burdens raise suppliers' thresholds of profitability. The procurement system should require only those extra costs that are absolutely necessary to satisfy public interests. In general, the more we rely on commercial techniques in the commercial marketplace, the more economic benefits will accrue. The government, and hence the taxpayers, will pay less to buy better products faster.

A success story. FTS2000 procurement is an excellent success story of saving contract costs and taxpayer dollars by relying more on the commercial marketplace and commercial practices. The federal govern-ment started in the early 1960s to slowly build its own long-distance network by leasing long-distance telephone lines and switches. This resulted in a rate of 30 to 40 cents per minute in the 1980s while commercial customers were paying 20 cents a minute. GSA developed a strategy to pay only for minutes used, like other commercial customers, and not lease equipment, which it had done previously. The competed FTS2000 contracts resulted in a per-minute price of 8 cents by taking advantage of commercially optimized networks and good commercial practices. These contracts are saving hundreds of millions of dollars each year.

Barriers to change. The major impediments to increased government-commercial integration can be grouped into five areas:

* complex federal rules and procedures make it difficult for contracting officials to perform market research, evaluate different ways of meeting needs, and select the best values;
* government-unique "how to" specifications and standards limit competition and creativity by failing to use existing commercial specifications for form, fit, function, and performance;
* cost and pricing data submission requirements and special cost accounting standards impose substantial burdens and risks on contractors;
* technical data rights provisions discourage contractors from investing in and applying advanced commercial technologies to solve government problems; and
* the determination of a domestic end product under the Buy American Act9 is difficult to use and conflicts with the Trade Agreements Ac"0 test of "substantial transformation" of components into end products, often putting U.S. suppliers at a disadvan-tage compared with suppliers from other countries.

A number of recommendations for reform and removal of impediments have already been identified. The Section 800 Panel considered these challenges and recom-mended specific changes in statutes. The President's Report on High Technology, issued in February 1993, includes recommendations to ease the burden on commercial contractors.11 In addition, because of the economic impact of a shrinking defense budget on major employers in the United States, the National Economic Council is also addressing the issue in its study of conversion of the defense industry.

Without changes to the current system, the inability of the federal government to reap the benefits of commercial technology at good commercially discounted prices will inanely continue. Moreover, it will be a continuing drain on the resources of U.S. suppliers as they compete on a global scale and a hindrance to the ability of defense contractors to quickly convert their unique products and practices into commercial enterprises.

Action

Make it easier to buy commercial items. (3)
Legislation should be enacted to:
* amend the Office of Federal Procurement Policy Act to provide a better definition of commercial items;
* amend the Truth in Negotiation Act to relax the requirements for cost and pricing data when a contract for commercial items is involved and to provide an expanded definition of adequate price competition;
* provide new exemptions to technical data requirements in commercial item acquisitions;
* amend the Buy American Act to increase competitiveness of U.S. firms by adopting the "substantial transformation" test now applied under the Trade Agreements Ac"2 to determine whether an offered product is from a foreign source; and
* provide for a new federal government commercial code, which would contain "commercial-style procedures" and eliminate selected provisions of law for specialized, social, or economic provisions.

Cross References to Other NPR Accompanying Reports
Reinventing Support Services, SUP03: Improve Distribution Systems to Reduce Costly Inventories.

Endnotes
1. Center for Strategic and International Studies, Integrating Civilian and Military Technologies: An Industry Survey (Washington, D.C., April 1993), p. 12.
2. Defense Science Board 1986 Summer Study, "Use of Commercial Components in Military Equipment," January 1987.
3. Defense Systems Management College, "Response to the Acquisition Law Advisory Panel," Fort Belvoir, VA, 1992.
4. General Services Administration, Federal Procurement Data Center, Federal Procurement Report, Fiscal Year 1992 (Washington, D.C., 1993), p. 8.
5. Military Specifications, MIL-P-45819D (June 12, 1992); MIL-P-43948A (December 31, 1986); and MIL-C-850438 (March 24, 1987).
6. National Defense Authorization Act, Fiscal Year 1990, 824, Public Law 101-189.
7. Defense Federal Acquisition Regulation Supplement, Parts 210 and 211.
8. National Defense Authorization Act, Fiscal Year 1991, 800 (Public Law 101-510).
9. Buy American Act of March 3, 1933 (Copeland Act) (41 U.S.C. 10a-10d).
10. Title 19 U.S.C., 2501.
11. Clinton, William J., and Albert Gore, Jr., Technology for America's Economic Growth, a New Direction to Build Economic Strength (Washington, D.C., 1993), pp. 22-23.
12. Title 19 U.S.C. 2501 - 2581.

PROC14:

Expand Electronic Commerce for Federal Acquisition

Background

Electronic commerce (EC) is the comprehensive, end-to-end electronic exchange of information needed to conduct business.

Since 1979, the private sector and the Accredited Standards Committee of the American National Standards Institute have aggressively sponsored electronic data interchange (EDI). Within the federal government, the Federal Information Processing Standards Publication 161 established the EDI standard.1 In EDI, data that would traditionally be conveyed in paper documents are transmitted or communicated electronically according to established rules and formats. Major industry associations and their member firms are committing significant resources to EDI. Even many small businesses have voiced their support and encouragement for the government to use EDI to provide electronic notification of small purchase opportunities.

Need for Change

The potential for savings from reengineering and automating the federal procurement system is enormous considering that the federal acquisition system involves over 20 million transactions and $200 billion each year. A test of EC at the Wright-Patterson Air Force Base illustrates the significant savings that can be achieved. This test validated that EDI can reduce the cost of purchased goods by almost 10 percent while reducing lead time by one-third and doubling buyer productivity. If applied governmentwide, this system has the potential for saving the government and taxpayers up to $500 million per year and eliminating 1,200 federal jobs due to increased competition among vendors and reduced federal paperwork.2 Another significant side benefit of EC, as derived from the pilot, is that it increased awards going to small businesses.

The private sector has been turning to EDI for some time now because it saves money. The federal government must catch up with the private sector to reduce its costs of doing business. Several federal acquisition organizations have recognized this need and started implementing local versions of EDI. However, if the federal acquisition community is to maintain an effective and efficient interface with the vendor community, it must implement EDI in a standard and consistent manner. Vendors should be able to connect with the federal EC system through a single implementation standard and should not be required to comply with varying implementations to conduct business with different federal agencies.

The government should build its EC system in consideration of the following private sector EDI community findings and observations:

* Successful implementation of EDI requires the full commitment of a company's top management, without which company-wide implementation of EDI will not only be wasteful and disorganized, but will likely fail.
* The requirement to use EDI should be based on a business decision, and its implementation should be assigned to the functional organization (e.g. purchasing) that it supports not the Information Resources Management (IRM) organization.
* Implementation of EDI and the development of specific EDI transaction guidelines and conventions should begin with basic business transactions, such as requests for quotations and purchase orders. More complex transactions, such as contracts, should follow.
* Reengineering functional processes (i.e., eliminating a particular step in a process to avoid the expense of automation) is necessary to realize the full benefits of EDI.3

Recent operational tests have verified that both industry and the government benefit from using EDI for small purchases. For industry, the benefits include one-time governmentwide registration, elimination of the need for local company representatives, and increased access to procurement information. For government, the benefits include increased competition, improved customer support, the ability to use existing agency automated acquisition systems, and access to commercial Value Added Network services (e.g. subscription computer services such as Prodigy or CompuServe) at no cost to the government.

Actions

1. Establish a governmentwide acquisition program for engaging in electronic commerce. (2)

The President should issue a directive that requires the President's Management Council, in coordination with the Office of Federal Procurement Policy of the Office of Management and Budget, to provide overall leadership, management oversight, and policy direction to implement electronic commerce for federal acquisition through the following actions:

* by March 1994, define the architecture for the governmentwide electronic commerce acquisition system and identify executive departments or agencies responsible for developing, implementing, operating, and maintaining the federal electronic system;
* by September 1994, establish an initial electronic commerce capability to enable the federal government and private vendors to electronically exchange standardized requests4 for quotations, quotes, purchase orders, and notice of awards and begin governmentwide implementation;
* by July 1995, implement a full-scale federal electronic commerce system that expands initial capabilities to include electronic payments, document interchange, and supporting databases; and
* by January 1997, require the heads of all agencies to have completed implementation of the federal electronic commerce system in their respective agencies.

2. Amend the Federal Acquisition Regulation to facilitate electronic commerce. (2)

By May 1994, the Federal Acquisition Regulatory Council should revise the Federal Acquisition Regulation to support full implementation of EDI and EC by the federal acquisition community.

Cross References to Other NPR Accompanying Reports
Reengineering Through Information Technology, IT11: Improve Methods of Information Technology Acquisition.
Improving Financial Management, FM04: Increase the Use of Technology to Streamline Financial Services.
Reinventing Support Services, SUP03: Improve Distribution Systems to Reduce Costly Inventories, and SUP04: Streamline and Improve Contracting Strategies for the Multiple Award Schedule Program.

Endnotes
1. U.S. Department of Commerce, Federal Register, vol. 56, no. 61, March 29, 1991, p. 13123.
2. The Government Acquisition through Electronic Commerce (GATEC) program at Wright Patterson Air Force Base has been testing EDI concepts for three years.
3. The evaluation of federal department and agency acquisition systems and the possibility of standardizing them should be considered under an EC initiative. For example, this would include revising the financial support systems to facilitate greater use of purchase cards and electronic fund transfer payments.
4. Standard electronic acquisition formats specify the placement and type of information required in requests for quotations, quotes, purchase orders, and other acquisition transactions.

PROC15:

Encourage Best Value Procurement

Background

Determining the successful competitor for a government contract requires a full assessment of available information. The award of a contract to a supplier based on lowest price alone can be a false economy if there is subsequent default, late delivery, or other unsatisfactory performance resulting in additional contractual or administrative costs. It is essential that all vendors are treated fairly in the competitive process. However, the needs of a vendor should not supersede those of the taxpayers and federal agencies. Competent, cost-efficient suppliers provide the best value to the government. While it is important that government purchases be made at a reasonable price, this should not require that an award be made to a supplier solely because the supplier submits the lowest offer.1

There are two basic methods of procurement sealed bid and negotiation. When sealed bid procedures are used, there is a public bid opening and the award must be made to the responsible offeror submitting the lowest offer based on price and price-related factors (e.g., transportation charges). When the negotiated method of procure-ment is used, however, the government has considerable latitude in structuring the procurement and can consider both price and other factors (e.g., technical capabilities, qualifications of key personnel, etc.) in selecting the contractor. Agencies have broad discretion in selecting factors to be considered, but must always consider price or cost to the government.

Allowing for the possibility of selecting other than the lowest offeror does not mean buying a Cadillac or buying supplies or services beyond the government's minimum needs. It simply means considering value differences between offers such as past performance records, quality of proposed solutions, and cost differences, and then choosing the best overall value. It means permitting the consideration of all factors when buying goods and services the way smart buyers in business make trade-off decisions to determine best value. The benefits of making best overall value source selection decisions can result in improved mission performance and lower life-cycle costs. It can also help to encourage vendors to provide their best products and services to the government.

When a procurement is structured to consider both price and other factors in making the selection to provide the greatest value to the government, it is often referred to as a "best value" procurement. The average person makes purchases on the basis of best value or greatest value every day. For example, if brand A batteries cost $1.00 and last 10 hours, and brand B batteries cost $1.50 but last 20 hours, the average person would consider brand B to be the best value.

Federal regulations provide for awards based on the greatest value and cite examples where the approach can be used.2 Examples cited are in the acquisition of research and development, professional services, or cost-reimbursement contracts. However, the process outlined in the Federal Acquisition Regulation for greatest value or best value procurements is complex and requires far more time and resources than other types of procurements. As a result, many procure-ment officials feel more comfortable awarding contracts based on lowest cost rather than best value.

Need for Change

Many federal agencies rely heavily on support from contractors to accomplish agency missions. Unless the contractors share an agency's commitment to quality, the agency cannot improve the quality of service provided to taxpayers. The government must find ways to reward contractors who perform and remove from the federal acquisition system those who do not. Acquisition strategies designed to support and foster the quality revolution need to be promoted and used to the fullest extent.

The federal government faces many problems implementing this quality revolu-tion in the procurement process. Even though the federal regulations clearly state that a prospective contractor must demon-strate that it is responsible, many contracting officers feel that the burden of proof is instead theirs. Contracting officers are often reluctant to reject offers from contractors who have a poor past performance record or who otherwise do not appear to be capable of performing. The reluctance is, in part, due to the fear of being second-guessed by reviewers, protests, or other legal action.3

Agencies do not always consider innovative ways to include quality considerations, such as past performance, when developing acquisition strategies. There needs to be a total rethinking and redefining of what best value means and how it can be used in all types of procurement strategies. This includes not only negotiated procurements that use price and other factors, but also other negotiated and sealed bid procurements.

In the area of "greatest value" or so-called "best value" procurement, many protests before the General Accounting Office (GAO) or the General Services Board of Contract Appeals (GSBCA) have identified the need to train the procurement workforce on when and how to effectively use the technique in source selection. In addition, a survey of Federal Acquisition Regulation (FAR) users conducted by the General Services Administration (GSA) indicates that the FAR coverage on source selection or use of the greatest value needs to provide better guidance, but not detailed or prescriptive regulations.4

Several agencies (e.g., the Defense Logistics Agency, GSA, and the National Aeronautics and Space Administration) have undertaken efforts to streamline the source selection process, share information on best practices, and educate contracting personnel on when and how to use the process effectively. Despite these efforts, the federal procurement workforce, as a whole, needs further training on the use of source selection techniques.

Actions

1. Define "best value" and provide regulatory guidance to implement a program for buying on a best value basis. (2)

By April 1995, the Director, Office of Management and Budget (OMB), in cooperation with the FAR Council and regulatory agencies, should formally define the concept of "best value." In doing so, the definition and related policy and regulatory guidance should be structured so that it (a) applies to all procurements, (b) fosters the notion that the government will measure vendor performance and only deal with contractors who demonstrate a commitment to quality, and (c) promotes the concept of "value for money." The FAR should be reviewed and appropriately revised as a part of this effort. In developing FAR coverage, every effort should be made to minimize complexity and provide for a streamlined process of making contract awards when price and other factors are considered in the evaluation process. Guidance should be provided on issues such as drafting solicitation language to clearly communicate the award factors to be considered and their relative weight, making cost/technical trade-off decisions, and debriefing offerors.

2. Issue a guide on the use of "best practices" source selection techniques. (2)

By April 1995, the Director, OMB, should identify agencies with successful programs for the use of the greatest value approach and, with their and the FAR Council's help, develop a best practices guide or series of guides on the elements of best value, such as past performance, price/technical trade-offs, evaluation of key personnel, and cost realism. These guides should share the lessons learned by the agencies with procurement personnel throughout the government.

3. Train procurement officials on source selection techniques. (1)

By January 1994, the Administrator, General Services Administration, should direct the Federal Acquisition Institute to develop a competency-based course to provide training to government contracting officials on the use of various source selection techniques. The course content should be revised as appropriate to reflect the regulatory and management guidance developed from the completion of action items 1 and 2.

Endnotes
1. 48 CFR 9.103(c).
2. Subpart 15.6 of the Federal Acquisition Regulation, 48 CFR 15.6.
3. See "PROC16: Promote Excellence in Vendor Performance" in this report.
4. FAR Improvement Executive Committee, FAR Improvement Project Report (October 1992), p. 16.

PROC16:

Promote Excellence in Vendor Performance

Background

When the government makes a contract, it takes on a private-sector partner to accomplish a public purpose. The government must be assured that its partner is reliable by examining its past performance. Procurement actions should also encourage suppliers to value government business, provide high-quality supplies and services on time and at a reasonable price, and be compatible with public policy goals.

Need for Change

Improvements in measuring and recognizing a contractor's performance as part of contract award, as well as improve-ments in the government's management of its contracts, will lead to greater value for the government and taxpayer.

The most important means for improving vendor performance is for the government's evaluation process in source selection to seriously consider vendor past performance when making new contract awards. Evaluation of vendor past performance plays a crucial role in vendor selection in the private sector. Yet, one of the most unfortunate features of the current procurement system is that the evaluation process for making contract awards gives little or no weight to vendors' past perfor-mance on earlier contracts.

Causes of poor quality. The quality of performance the government gets from its vendors is likely to be significantly worse when:

* a history of vendor performance is not maintained for use by the government in awarding future contracts, and
* the government fails to use a powerful incentive for better contractor performance by not using information on past performance as an important factor in making new contractor awards.
The Federal Acquisition Regulation (FAR) requires contracting officers to consider vendor performance. Nonetheless, most contracting officers have not used vendor performance data to maximum advantage. Vendors often have to provide some outside references in a negotiated procurement but may choose the references to submit. Many line managers believe references are often not candid for fear of possible legal liability, and the weight given to vendor references in the evaluation scoring system is extremely small. Even when limiting outside references, agencies deprive themselves of the other data most likely to be accurate and that, if used, exerts the most powerful incentive on vendor performance information about vendor performance within the agency itself.

The federal government must also improve its contract management activities with regard to vendor performance. A Merit Systems Protection Board (MSPB) study on the quality of the contracting workforce finds that the distrust built into the present federal procurement system is not effective in reducing waste, fraud, or abuse, despite its high cost. In the MSPB study, a contractor states that "increased oversight has become cumbersome, delayed the process, and has created an atmosphere of fear and distrust. This has greatly impacted the decision making process and has increased overall costs to both the government and the contractor."1 This one contractor's statement is representative of the way a majority of contractors view the federal procurement system.

The costs of compliance. A recent study by the Center for Strategic and International Studies (CSIS) indicates that contractor compliance with government controls costs three times what commercial companies spend on administrative costs.2 Burdens that the government imposes on its suppliers often are translated into higher prices charged to the government, and sometimes to commercial customers.

In many respects, the success of any procurement action hinges on how well the contract is administered to ensure value to the government. In broad terms, contract administration responsibilities comprise fiscal and cost accounting methods, control of government property, quality control, production control, pricing and price re-determination where authorized, compliance with standard contract clauses, subcontract-ing consent, and in some cases, contract terminations.

Each agency is organized differently to provide contract administration. Within the Department of Defense (DOD), there are two specialized organizations: the Defense Contract Management Command (DCMC) with 19,000 people looking after $750 billion under 420,000 contracts for 25,000 contractors, and the Defense Contract Audit Agency (DCAA), with 6,000 people responsible for about $260 billion in contract audit work. Civilian agencies often rely on their contracting officer to perform administration and their Office of Inspector General (IG) to perform contract audits. However, most IGs use DCAA for some or all of their audits. The interagency OMB SWAT Team Report on Civilian Agency Contracting found certain weaknesses in the performance of contract audit and administration functions.3 An interagency group on Civilian Contract Administration Services (CIVICAS) was formed to assess alternative means for heads of agencies to efficiently meet their responsibilities to ensure performance under properly managed contracts.

Current contract administration activities are not reviewed from a governmentwide perspective to measure output or value. Defense agencies are being downsized while civilian agencies are looking to improve their contract administration practices. There is no coordinating body to set performance goals or help determine the effectiveness of contract actions in meeting line manager needs through the contracting process. While the Office of Federal Procurement Policy (OFPP) could establish standards in this area, true change will come about only with a team approach of both the government and its contractors seeking the best means to meet contract requirements.

Examples of success. One example of the type of program that captures the tenets of a trust-centered team approach is the Process-Oriented Contract Administration Services (PROCAS) program developed by the Defense Logistics Agency. This program works with contractors to accredit internal control procedures to lessen government controls. Another example, in the audit area, is Motorola's experience with DCAA. In 1988, it took one year to get, review, report, and decide on overhead rates, mainly because the contractor did not always know what the government wanted. DCAA worked with internal company auditors in 1989 and cut the total process to five weeks, resulting in significant savings for all parties. Another cooperative approach to improve contract administration is the work of the Army's Corps of Engineers to avoid costly disputes and an adversarial environment in its construction contracts. Under a partnering concept, which sets out how the parties will work through any disagreements that arise under the contract, the Corps has not had a single case of litigation. This helps keeps both parties focused as a team on the contract goals.

The federal procurement system must take into account vendor performance, both prior to contract award and during contract administration, to ensure that agency needs for continuous, reliable service are met and taxpayer dollars are well spent.

Actions

1. Establish an interagency Excellence in Vendor Performance Forum. (2)

By January 1994, the Director, Office of Management and Budget (OMB), should establish an interagency Excellence in Vendor Performance Forum to develop policies and techniques to measure contractor performance and use this information in source selection decisions. A change should be made in the procurement system throughout the government so that past performance becomes a genuine and serious part of the source selection process. The Director, OMB, should work with agencies to experiment with different methods for getting past performance to play a significant role in the procurement process and to publicize best practices throughout the government. Changes should include:

* developing procedures for systematically gathering and using ongoing performance information on an agency's vendors, obtained from those interacting with vendors (users and contract administration personnel);
* giving past performance a weight in evaluation scoring systems significant enough to have a real impact on award decisions and to be noticed by the vendor community;
* making satisfaction of customers (users and contract administration personnel) with vendor performance one measure used to evaluate contracting officers involved in the contract award process;
* establishing a collaborative cost-effective governmentwide contract administration program emphasizing cross-servicing agreements among agencies to manage contracts to avoid unnecessary duplication;
* engaging government contractors in establishing partnering programs and measurable goals for reducing administrative burdens on both government and industry while ensuring contractor performance and value to the government; and
* obtaining contractor input in policy deliberations through surveys, town meetings, or other means to help develop effective and accountable contract management programs.
By April 1995, the Director, OMB, should issue a "best practices" manual that outlines the techniques to measure and use vendor information in source selection decisions.

2. Establish an award for contractor and government acquisition excellence. (2)

By January 1994, the Director, OMB, and agencies should implement procedures for agencies to nominate contractors and government contracting staff for exceptional performance awards in various categories.

Cross References to Other NPR Accompanying Reports
Reengineering Through Information Technology, IT12: Provide Incentives for Innovation.
Endnotes
1. U.S. Merit Systems Protection Board, "Workforce Quality and Federal Procurement An Assessment," Washington, D.C., July 1992, p. 39.
2. Center for Strategic and International Studies, Integrating Civilian and Military Technologies: An Industry Survey (Washington D.C., April 1993), p. 12.
3. U.S. Office of Management and Budget, "Summary Report of the SWAT Team on Civilian Agency Contracting," December 3, 1992, p. 11.

PROC17:

Authorize a Two-Phase Competitive Source Selection Process

Background

Federal law requires executive agencies to evaluate sealed bids and competitive proposals based solely on the factors specified in the solicitation. In the case of competitive proposals, the law requires that the government conduct, before award of the contract, written or oral discussions with all responsible sources submitting proposals within the competitive range, considering only price and other factors included in the solicitation.

In certain negotiated procurements, the requirement to consider price in establishing the competitive range and include all proposals with a reasonable chance of being selected for award creates problems for both prospective offerors and the government. This is especially problematic for contracts that require an offeror to perform a substantial amount of design work in order to prepare its proposal. For example, in design-build construction procurement, it is very costly for prospective offerors to compete because they must do a considerable amount of the design work before they can price their proposal. Under a design-build construction contract, the contractor is responsible for designing and constructing the building or other public work. This differs from the traditional approach, where a contract is awarded to an architect-engineer firm that designs the project, and after the design is complete, separate bids for construction are solicited and a contract is awarded.

When the government uses a design-build approach, contractors often complain of the high cost to compete for such projects and urge the government to use a two-phase process that would focus on qualifications and concepts in the first phase and limit competition in the second phase to a specified number of contractors. This would control a contractor's expenses in the first stage and assure those contractors that do incur the expense in the second phase that they have a realistic chance of being selected for the award.

Need for Change

Executive agencies and departments involved in contracting for design-build construction projects, lease construction projects, prototype production, or other similarly complex projects where the cost of preparing and submitting a proposal is significant would benefit by using a two-phase process. It is similar to the commercial practice of "shortlisting," where the best quality firms are chosen up-front, and only then asked to engage in a more detailed technical and price competition.

The two-phase process would also permit more efficient use of government personnel by allowing them to focus on the detailed proposals of the most qualified offerors and expedite the selection, evaluation, and award process. Such limited competition should ensure reasonable prices while offering the government a range of designs or approaches to satisfying the government's requirement. This would benefit both prospective contractors and the government. This process would shorten the lead time for such procurements, reduce costs, and provide for more timely fulfillment of the customers' needs.

The regulations and case law related to the establishment of the competitive range currently preclude the government from predetermining the number of offerors considered to be within the competitive range. The government is required to see what the market produces and then determine which offerors, when evaluated against the factors specified in the solicitation, have a reasonable chance of being selected for award. In a tight economic market with limited commercial activity, there can be intense competition for government contracts. For example, it is not uncommon for the government to receive more than 25 offers on major design-build construction projects. Often the offers are from well-qualified local firms and national real estate developers, and the final competitive range includes several offerors that have submitted outstanding proposals. Negotiating with all offerors in the competitive range requires a substantial amount of time, resources, and costs for the government and the offerors.

If the government continues to use the current process, it will discourage some of the best offerors from competing because they are becoming more and more reluctant to expend the physical resources and costs when faced with unlimited competition for the award. If competition is limited in the second stage, the offerors would be more likely and willing to expend the resources because they would feel that they have a realistic chance of getting the award.

Action

Authorize the use of a two-phase selection process for certain types of contracts. (3)
The Federal Property and Administrative Services Act and the Armed Services Act should be amended to authorize the use of a two-phase selection process for the evaluation and award of contracts when a substantial amount of project design work must be accomplished before offerors can develop a price proposal, or in other complex projects where the cost of preparing and submitting a proposal is significant.1 The process would provide for the submission of statements of qualifications, performance data, and limited technical proposals in the first phase. Based on evaluation of these submissions, the government would invite up to five offerors to submit detailed technical proposals and price proposals. No more than five offerors would be selected, based on an evaluation of the qualification statements and limited technical proposals against selection criteria/factors specified in the solicitation. In the second phase, the government would evaluate the detailed technical and price proposals and conduct discussions, as necessary, prior to the final selection of the offeror.

Endnotes
1. The Federal Property and Administrative Services Act of 1949 (41 U.S.C 303b), and the Armed Services Act (10 U.S.C. 2305(b)).

PROC18:

Authorize Multiyear Contracts

Background

Most federal agencies operate with annual appropriations. This limits their ability to contract for periods that extend beyond the end of the fiscal year. The lack of authority to cross fiscal years creates uncertainty as to whether a contractor and its services will be available to agencies after September 30, and imposes additional paperwork burdens on contracting personnel. There are circumstances where contracting for more than one year would reduce the overall cost of acquiring supplies and services. The use of multiyear contracts provides contractors with a guarantee of work over a period of years, lowers risk, and as a result produces lower contract prices. It would also provide agencies with a smaller number of contract actions and reduce the workload associated with exercising contract options. Special legislative authority to conduct multiyear procurement has been given to some agencies for selected programs. However, the authority is limited.

Need for Change

The General Accounting Office (GAO) has identified several benefits of multiyear contracting.1 Specifically, GAO indicated that:
* contract prices could be reduced for agency service and supply needs,
* administrative costs to federal agencies could be reduced,
* the quality of performance and service from contractors could increase,
* competition for government contracts could increase, and
* small business interests would be enhanced and be able to compete better in their market segment.
The Department of Defense (DOD) has multiyear contracting authority and multiyear funding authority for many of its weapons programs. The authority enables defense contractors to spread their costs over a larger production base, thus reducing the cost per item. While not in the same business, many civilian agencies buy supplies, equipment, systems, and services to support vital mission programs that go beyond the fiscal year appropriation.

Another problem, which is tied to the limitation on contracting with annual funds for periods that extend beyond the end of the fiscal year, relates to severable services (e.g., services that are performed on a regular basis over a period of time like housekeeping, guard services, etc.). Currently, agencies are precluded from contracting for severable services for periods that extend beyond the fiscal year unless they have specific statutory authority to do so. While a few agencies (e.g., Department of Health and Human Services) have been authorized to contract for periods that cross fiscal years so long as the term does not exceed one year, most agencies do not have similar authority. As a result, agencies are placed in an impossible situation either award all severable service contracts so they expire September 30 or take the risk of being accused of technically violating the Antideficiency Act.2

The inability to award multiyear contracts causes a major paperwork burden that increases federal administrative costs. At the end of each fiscal year, contracting officials must modify every federal contract funded with annual funds to add funding for the new contract period. This exercise is costly and unnecessary and is exacerbated when Congress fails to pass appropriations bills before the start of the fiscal year. In such cases, a notice must be sent to every one of these contractors each time there is a continuing resolution, even if the resolution is only for a few days, as has often been the case.

The ability to award multiyear contracts will allow federal agencies to reduce the administrative time and resources associated with recompeting contracts annually. It will also provide federal managers with continuity of service and avoid going through a learning process every year with a new contractor.

Actions

1. Authorize multiyear contracts. (3)
The Federal Property and Administrative Services Act should be amended to authorize agencies to contract for periods not in excess of 10 years when (a) appropriations are available and adequate for payment for the first fiscal year; (b) the agency determines that the government's need for the property or service being acquired is reasonably firm and continuing; and (c) such a contract would serve the best interests of the federal government by encouraging competition or promoting economies in administration, performance, and operation, and will not inhibit small business participation. Agencies should ensure that the multiyear contract would be either fully funded or funded for the first fiscal year plus any estimated cancellation costs. The availability of funds clause should be structured to provide that the contractor would be notified if funds are not appropriated by Congress and made available for payment under the contract. Internal agency procedures must also provide for program offices and/or budget offices to notify contracting offices as to the continued availability of funds. In the event funds are not made available for subsequent fiscal years, the contract would be cancelled and cancellation costs paid from funds originally obligated.

2. Allow contracts for severable services to cross fiscal years. (3)

The Federal Property and Administrative Services Act should be amended to authorize civilian agencies that use annual appropriations to enter into contracts for severable services with a period of performance that crosses fiscal years so long as the term does not exceed one year unless the contract is a multiyear contract specifically authorized by statute. This legislation would allow federal agencies to reduce their administrative costs by eliminating the need for "availability of funds" clauses.

Cross References to Other NPR Accompanying Reports
Mission-Driven, Results-Oriented Budgeting, BGT05: Provide Line Managers with Greater Flexibility to Achieve Results.
Endnotes
1. U.S. General Accounting Office, Federal Agencies Should Be Given General Multiyear Contracting Authority for Supplies and Services, PSAD-78-54 (Washington, D.C.: U.S. General Accounting Office, January 1978).
2. 31 U.S. Code 1341.

PROC19:

Conform Certain Statutory Requirements for Civilian Agencies to Those of Defense Agencies

Background

Three statutory requirements formerly applied governmentwide have been repealed or amended only for defense-related agencies. They are:

* The requirement to obtain commercial pricing certificates when other than full and open competition is used. The law requires that offerors certify that prices offered for parts or components are not more than their lowest commercial prices, or submit a written statement specifying the amount of the difference between their lowest commercial price for the parts of components and the prices offered.1
* The limitation on accepting an initial offer and awarding a contract to other than the offeror submitting the lowest priced offer.2
* The requirement to obtain certified cost or pricing data before awarding a negotiated contract that exceeds $100,000.
In addition, DOD has been given authority to enter into cooperative agreements to conduct advanced research projects, primarily through the Advanced Research Projects Agency, but civilian agencies have not been given similar authority. Procurement contracts are often not well suited for research and development projects because they involve support, stimulation, and cooperation. Cooperative agreements provide the flexibility and innovation required. In research and development, government funding is often more like an investment.

Need for Change

The DOD Inspector General found that the commercial pricing certificate was not cost-effective because the government was paying the lowest commercial price for items of supply procured even when the certificate was not obtained. Its continued use imposed a burden on the procurement process with-out a beneficial return. As a result, Congress repealed the requirement.3 This should be logically extended governmentwide.

DOD may make contract awards to other than the lowest priced acceptable offeror based on an initial offer without discussions. When an offeror who is not the low offeror clearly provides the best technical proposal at a reasonable price, it may be in the government's best interest to award to that offeror without discussions. Award without discussions is appropriate in this circumstance when neither technical nor price improvements are expected to result from a round of discussions with offerors and when a superior proposal will not be significantly improved. This avoids unnecessary administrative costs for the offerors and the government.

The threshold for obtaining cost and pricing data was increased to $500,000 for DOD, NASA, and the Coast Guard, but kept at $100,000 for civilian agencies. The current statute provides that the $500,000 threshold will be reduced to $100,000 for contracts or subcontracts awarded, or modifications made, after December 31, 1995. In addition, defense agencies have statutory authority to levy penalties on contractors who knowingly submit defective pricing, whereas civilian agencies may not take such punitive action.4

The $100,000 threshold for submission of certified cost or pricing data, which was established in 1962, equates to $520,000 in 1992 dollars when adjusted for inflation. Raising the threshold for civilian agencies and maintaining the $500,000 for defense agencies will significantly reduce the paperwork burden on the government and contractors and will make the threshold consistent with the threshold for the Cost Accounting Standards, which was raised to $500,000 in 1988.

The Acquisition Law Advisory Panel to the United States Congress on Streamlining Defense Acquisition Law (Section 800 Panel) recommended that the $500,000 threshold be maintained for DOD. In making its recommendation, the panel stressed that the $500,000 threshold takes into account inflation, since the threshold was originally established in 1962.5

Civilian agencies that conduct advanced research projects have a need for the same flexibility as DOD.6 The additional flexibility will provide for more supportive and innovative arrangements for research.

In order to maintain a common governmentwide approach to the acquisition of property and services, statutory changes must be made to ensure consistency in the requirements for civilian and defense agencies. The current inconsistency in the statutory requirements causes inconsistent governmentwide application.7

Actions

1. Repeal the requirement for commercial pricing certificates and authorize contract awards without discussions. (3)

The Federal Property and Administrative Services Act should be amended to repeal the requirement for certificates of commercial pricing.8 The amendments should include a provision authorizing the award of a contract without discussions with offerors when the solicitation states that award may be made without discussions unless discussions are determined to be necessary. These changes will ensure a common approach throughout the entire federal government, which will accordingly benefit industry and government alike.

2. Maintain the $500,000 threshold for cost and pricing data requirements for DOD. (3)

The Truth in Negotiations Act should be amended to maintain the dollar threshold for application of the statute at $500,000.9 All words in the statute that refer to the threshold reverting to $100,000 after December 31, 1995, should be eliminated, and section 803 of the National Defense Authorization Act should be repealed.10 The amendment should also provide for periodic adjustment of the threshold to reflect inflation. The permanent increase in the threshold would allow DOD, NASA, and the Coast Guard to maintain the administrative savings and lower contract costs that result from the higher threshold.

3. Establish a $500,000 threshold for cost and pricing data requirements for civilian agencies. (3)

The Federal Property and Administrative Services Act should be amended to make it conform to the Truth in Negotiations Act requirements to all federal agencies.11 The increase in the threshold, and periodic adjustment of the threshold to account for inflation, should increase the efficiency and effectiveness of civilian agency acquisitions and result in better service to the federal manager. Civilian agencies would be able to reduce procurement lead time by 45 to 60 days for procurements between $100,000 and $500,000. The paperwork and administrative burden placed on contractors when submitting offers to the civilian agencies for certain negotiated contracts between $100,000 and $500,000 should be reduced. The administrative cost of awarding negotiated contracts for civilian agencies would decrease as a result of the threshold increase.

4. Authorize civilian agencies to use cooperative agreements for advanced research projects. (3)

Civilian agencies should be provided with statutory authority to enter into cooperative agreements for advanced research projects comparable to that currently available to the Department of Defense.

Endnotes
1. 41 U.S.C. 253e.
2. 40 U.S.C. 253b.
3. National Defense Authorization Act, Fiscal Year 1990.
4. Truth in Negotiations Act (10 U.S.C. 2306a).
5. Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Law, Executive Summary (January 1993), p. 42.
6. 10 U.S.C. 2371.
7. Truth in Negotiations Act, 1962.
8. 41 U.S.C. 253a(b)(B).
9. 10 U.S.C. 2306a.
10. National Defense Authorization Act, Fiscal Year 1991 (Public Law 101-510).
11. 41 U.S.C. 254(d), and 10 U.S.C. 2306a.

PROC20:

Streamline Buying for the Environment

Background

Buying for the environment means using the federal procurement process to support programs intended to preserve the world's natural resources for future generations of Americans. The procurement process is used to encourage the development of markets for products that are energy efficient, contain recovered materials, or are less harmful to the environment than competing products and to conserve the world's natural resources by promoting the use of new technologies.

A number of laws (e.g., the Energy Policy Act of 1992 and the Resource Conservation and Recovery Act [RCRA] and executive orders require the federal government to play a leadership role in developing and executing programs that provide for the protection of the environment. Many of these require the government to be an enlightened, environmentally conscious, and concerned consumer.

The Resource Conservation and Recovery Act. RCRA requires federal agencies to maximize their purchases of products made with recovered materials.1 The Act requires:
* the Environmental Protection Agency (EPA) to issue guidelines that designate items which are or can be produced from recovered materials;
* agencies, to the extent they purchase designated items, to purchase those with the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, unless the items are not available within a reasonable period of time, fail to meet performance standards, or are unreasonably priced;
* agencies to eliminate from product specifications unnecessary requirements for virgin materials; and
* the Office of Federal Procurement Policy (OFPP), in cooperation with EPA, to implement these requirements and report to Congress every two years on agency progress in implementing RCRA.

RCRA also requires agencies to develop affirmative procurement programs. The programs must contain four elements: (1) a preference program, (2) a promotion program, (3) procedures for obtaining and verifying estimates and certifications of the content of recovered materials, and (4) annual review and monitoring.

From 1976, when RCRA was enacted, until the 1990's, implementation throughout the federal government was perfunctory at best. EPA issued only five guidelines, designating recycled paper products, cement and concrete containing fly-ash, retreaded tires, re-refined lubricating oil, and building insulation containing recovered materials. Agencies did not collect purchase information data, and there were no interagency efforts to promote the purchase of recycled products.

The Energy Policy Act of 1992 requires federal agencies to establish energy management programs to reduce energy consumption by 20 percent by the year 2000 using 1985 consumption as the base.2 Agencies are also required to install all available energy and water conservation measures in federal facilities when the payback period is 10 years or less.

The Energy Policy Act. The Energy Policy Act imposes a number of require-ments for the procurement of supplies and services, including the requirements that:
* Agencies negotiate with electric, water, and gas utilities to design cost-effective demand management and conservation incentive programs and provide for the use of energy savings performance contracts. Demand management and conservation incentive programs are established by utilities because it is more cost-effective for them to invest their funds in conservation instead of constructing additional power plants in order to accommodate projected customer demands. The utilities are in effect buying conservation through rebate and other incentive programs that pay customers for installing energy-efficient equipment or changing their operations to save energy.
* Federal contractors, and their subcontractors, who manage and operate federally owned facilities, use energy conservation measures designed to reduce energy costs in government-owned and contractor-operated facilities, which are ultimately borne by the federal government.
* The Administrator, General Services Administration (GSA), the Secretary of Defense, and the Director of the Defense Logistics Agency undertake a program to include energy-efficient products in carrying out their procurement and supply functions.
* GSA coordinate and hold regular biennial workshops in each of the 10 standard federal regions on energy management, conservation, efficiency, and planning strategy. The administrator is required to invite Department of Energy (DOE), state, local, tribal, and county public officials who have responsibilities for energy management or may have an interest in such matters. These workshops must address the procurement and use of energy-efficient products.

Need for Change

Congress and the General Accounting Office (GAO) have criticized agency implementation of RCRA.3 EPA took more than six years to issue its first guideline, and has so far issued a total of five. For calendar years 1990 and 1991, the federal government estimates that for the five items covered by the guidelines, only 26 percent of all paper purchased had recovered content, less than 3 percent of tire purchases were for retreads, and less than 1 percent of re-refined oil was purchased.4

Recent progress. Over the last two years, agencies have placed greater emphasis on the procurement of recycled, environmentally preferable, and energy-efficient products and services. For example, the Office of Federal Procurement Policy (OFPP) issued a policy letter that emphasized the need to procure environmentally sound and energy-efficient products and services, as well as those made with recovered material. The Council on Federal Recycling and Procurement Policy was instrumental in assisting agencies to develop and implement their affirmative procurement programs, purchase recycled products, eliminate barriers to RCRA implementation, and develop FAR implementation language.5 And, a soon-to-be-signed Executive Order on Federal Acquisition, Recycling, and Waste Prevention will mandate increased procurement of recycled and environmentally preferable products.

Few agencies have made substantial efforts to purchase products that are not covered by EPA guidelines or to purchase items containing more recovered material than the minimum content standard set by EPA. However, it is possible to do so. The new Executive Order will require EPA to streamline its guideline process so that more products can be designated faster and content standards can be updated more regularly. This should enable agencies to make greater strides in purchasing these products. GSA has contracted for more than 900 products (mostly paper products) containing recovered materials and an additional 1,200 products that have other environmentally beneficial features.6 As a central procurement agency for the federal government, GSA has marketed these products to other federal agencies.

Barriers to success. One of the reasons RCRA is difficult to implement is that there are no common definitions for certain critical terms. EPA proposed consensus definitions for certain terms used by consumers and industry but included a disclaimer that the terms used in federal procurement may differ from the proposed consensus terms because of RCRA definitions.

EPA deferred to the Federal Trade Commission (FTC) with respect to environmental marketing claims.

Currently the law requires estimates, verification, and certification of a certain nature because it presumes agencies will select vendors based on highest recycled material content. Of all the acquisition strategies available, this is the least likely to be used since there is no way to accurately verify content estimates. The result is a paperwork burden on industry that is not linked to the acquisition strategy.

Another problem is the requirement that purchase contracts stipulate the collection of information on the amount of recycled material contained in products. This imposes still more paperwork burdens on the government. The paperwork burden is particularly large for small transactions.

Agencies are currently implementing the Energy Policy Act of 1992. The Department of Energy is in the process of developing regulations covering certain aspects of the law, including those that deal with energy-savings performance contracts. GSA is responsible for taking action on those aspects of the Act dealing with intergovernmental energy management planning and coordination.

Governmentwide implementation of the Act can be furthered by the establishment of indefinite delivery contracts for energy audits and retrofit projects. Such contracts should be made available to federal agencies for optional use. The Naval Facilities Engineering Command in San Diego established such contracts for small retrofit projects (e.g., replacement of small motors, lighting fixtures) that can serve as the model for establishing contracts for use by all government agencies.

GSA and the Navy have been working with public utilities, such as San Diego Gas & Electric, to take advantage of services that the government is entitled to under tariffs approved by the public service commission, such as energy audits, demand management, and conservation programs. In some cases, when public service commissions approve public utilities rates, they provide that a portion of the rate charged be used for programs to promote conservation. Until recently, federal agencies were not able to take advantage of such programs because of statutory limitations. However, the Energy Policy Act now authorizes agencies to accept financial incentives, goods, or services generally available to customers who participate in utility incentive programs. GSA is responsible for negotiating area-wide utility contracts for use by federal agencies in acquiring utility services.

Many of the provisions of the Energy Policy Act require contracting personnel to develop new and innovative contracting methods in order to aid agencies in achieving the goals for saving energy by the year 2000. Contracts will be needed for new technology, and new financing sources (e.g., energy savings performance contracts) will be involved as well. An electronic commerce system is a means to both streamline procurement processes and reduce the use of paper.

Actions

1. Amend the Resource Conservation and Recovery Act (RCRA) to clarify procurement issues that impede achievement of its procurement objectives. (3)

The Resource Conservation and Recovery Act should be amended to:
* Delete statutory definitions of recovered material and task EPA to establish mechanisms for the coordination of interagency and industry strategies for maximizing the use of products containing recovered materials. In addition, EPA should develop consensus objectives and terminology that will be more compatible with that used at the state and local government level and in private industry.
* Establish a threshold for application of affirmative procurement program requirements to individual contracts that is tied to the proposed $100,000 simplified acquisition threshold.
* Eliminate the statutory requirement for vendor certification and provision of estimates.
* Permit agencies other than DOD and GSA to retain and use funds generated from the sale of materials for recycling.7

Congress should permit EPA and other agencies to determine the best strategy for acquiring the product, as well as the best approach for ensuring compliance with contract requirements. Congress should also consider the necessity for EPA to issue guidelines. As an alternative to the guideline approach, Congress should consider giving agency heads the responsibility and accountability for procuring environmentally preferable products consistent with the demands for efficiency and cost-effectiveness.

2. Develop "best practice" guides on buying for the environment. (2)

By April 1995, the President should direct the development of one or more guides on contracting issues related to implementation of energy management programs and buying for the environment. These guides should be distributed to government procurement personnel and be used in conducting the conference workshops that are required under the Energy Policy Act.8 The guides should convey lessons learned and provide best practices information for contracting for energy and environmentally related supplies and services, including construction. The guides should address procurement issues that are being raised by operational procurement personnel, such as how to determine whether the project is a service contract or a construction contract; what can be ordered from area-wide utility contracts; how to place orders; what are the governmentt3s obligations in terms of awarding contracts under the Energy Policy Act to small, small disadvantaged, and small women-owned business concerns; and what are procedures for establishing energy performance contracts.
3. Encourage multiple award schedule contractors to identify environmentally preferable products. (1)

By January 1994, the Administrator, General Services Administration (GSA), should develop and include a contract clause in multiple award schedule contracts to require contractors to identify in their brochures and on their schedule price lists products (including packaging) that are environmentally preferable. Contractors should only be permitted to identify products for which they have documentation to support the environmental market claims and that meet the Federal Trade Commissiont3s guides for making such claims.

4. Provide energy efficiency information in GSA and DLA catalogs and automated
systems. (1)

By August 1994, the Administrator, GSA, and the Director, Defense Logistics Agency, should provide energy efficiency information in their supply catalogs and other publications in order to aid agencies in ordering from supply sources. Automated systems that provide information to ordering agencies and/or provide for electronic ordering should also be modified to provide the same type of information.

5. Encourage multiple award schedule contractors to identify equipment that meets the EPA Energy Star requirements. (1)

By January 1994, the Administrator, GSA, should develop and include a contract clause in multiple award schedule contracts for computer equipment to require contractors to identify equipment that meets "EPA Energy Star" requirements for energy efficiency in their brochures and on their schedule price lists.

6. Encourage federal agency use of area-wide utility contracts for energy audits. (1)

By August 1994, the Administrator, GSA, should encourage federal agency use of area-wide utility contracts for requesting energy audits when the utility companyt3s approved tariff requires the utility to provide such service to all customers. Utilities should be required to perform audits in compliance with federal procedures for life-cycle costing. To provide an alternative to ordering energy audits from the public utilities, the Administrator, GSA, should also establish, by October 1994, indefinite delivery service contracts for use by all agencies in obtaining energy audits. Use of the contracts would be optional.

7. Establish indefinite delivery contracts for energy retrofit services. (1)

By October 1994, the Administrator, GSA, should establish indefinite delivery contracts, similar to those currently used by the Navy, for energy retrofit services that would allow user agencies to order certain services, such as replacement of small motors, retrofitting of lighting fixtures, etc.

Endnotes
1. Resource Conservation and Recovery Act (42 U.S.C. 6962).
2. Public Law 102-486 (October 24, 1992).
3. U.S. General Accounting Office, Solid Waste: Federal Program to Buy Products with Recovered Materials Proceeds Slowly, RCED-93-58 (Washington, D.C.: U.S. General Accounting Office, May 1993).
4. Data as of July 1993 provided by the Office of Management and Budget, Office of Federal Procurement Policy.
5. Executive Order 12780, "Federal Agency Recycling and the Council on Federal Recycling and Procurement Policy."
6. Data as of July 1993 provided by the General Services Administration, Federal Supply Service.
7. Public Law 102-486, General Services Administration and 10 U.S.C. 2577, Department of Defense.
8. Energy Policy Act, 156.

Appendices

Appendix A:

Summary of Actions

by Implementation Category

(1) Agency heads can do themselves
PROC02.1 Establish an interagency program to improve the federal governmentt3s procurement workforce.
PROC03.2 Provide resources to the Federal Acquisition Institute to support innovative, new ideas and procurement techniques.
PROC04.4 Revise agency acquisition-related regulations to eliminate internal barriers.
PROC05.3 Provide on-line access to Davis-Bacon Act wage schedules through an electronic system.
PROC05.4 Revise labor regulations to improve service.
PROC06.5 Identify costs to the government and contractors of responding to protests.
PROC06.6 Identify and eliminate causes of protests and improve agency processes.
PROC08.1 Establish an interagency team to develop a plan for improving federal information technology (IT) acquisitions.
PROC08.2 Increase IT delegation of authority to agencies.
PROC08.3 Eliminate requirements and alternatives analyses for commodity IT acquisitions.
PROC08.4 Pilot test alternatives for commodity IT acquisitions.
PROC08.5 Identify and test innovative procurement strategies that reduce the costs for IT items.
PROC09.1 Provide managers with the ability to authorize employees who have a bona fide need to buy small-dollar items directly using a purchase card.
PROC09.2 Require all government supply sources to accept the purchase card.
PROC09.4 Amend Department of the Treasury regulations to authorize the use of the purchase card for cash advances.
PROC15.3 Train procurement officials on source selection techniques.
PROC20.3 Encourage multiple award schedule contractors to identify environmentally preferable products.
PROC20.4 Provide energy efficiency information in GSA and DLA catalogs and automated systems.
PROC20.5 Encourage multiple award schedule contractors to identify equipment that meets the EPA Energy Star requirements.
PROC20.6 Encourage federal agency use of area-wide utility contracts for energy audits.
PROC20.7 Establish indefinite delivery contracts for energy retrofit services.
(2) President, Executive Office of the President, or Office of Management and Budget can do
PROC01.1 Convert the Federal Acquisition Regulation from rigid rules to guiding principles.
PROC01.2 Implement the procurement reform plan.
PROC03.3 Identify a steering group for the Federal Acquisition Institutet3s research.
PROC04.3 Establish a single electronic bulletin board capability to provide access to information on contracting opportunities.
PROC05.2 Amend the executive order on convict labor.
PROC07.4 Demonstrate the continued commitment to small and small disadvantaged businesses.
PROC09.3 Amend the Federal Acquisition Regulation (FAR) to promote use of the purchase card.
PROC10.1 Revise Executive Order 12352 to conform to the new vision for federal procurement.
PROC14.1 Establish a governmentwide acquisition program for engaging in electronic commerce.
PROC14.2 Amend the Federal Acquisition Regulation to facilitate electronic commerce.
PROC15.1 Define "best value" and provide regulatory guidance to implement a program for buying on a best value basis.
PROC15.2 Issue a guide on the use of "best practices" source selection techniques.
PROC16.1 Establish an interagency Excellence in Vendor Performance Forum.
PROC16.2 Establish an award for contractor and government acquisition excellence.
PROC20.2 Develop "best practice" guides on buying for the environment.
(3) Requires legislative action
PROC02.2 Provide civilian agencies with authority similar to DOD's for improving the acquisition workforce.
PROC03.1 Provide new legislative authority to test innovative procurement methods.
PROC04.1 Enact legislation simplifying procurement.
PROC04.2 Enact legislation simplifying Department of Defense (DOD) unique procurement requirements.
PROC04.5 Develop a pamphlet on statutory acquisition requirements for distribution to small businesses.
PROC05.1 Enact legislation to simplify acquisition labor laws.
PROC06.1 Establish a uniform standard of review for all protest forums by changing the standard of review at the GSBCA to conform to that used in the courts.
PROC06.2 Allow penalties for frivolous protests.
PROC06.3 Establish a single forum within the judicial branch to consider protests.
PROC06.4 Allow continued performance of contracting functions up to the point of contract award as part of any pre-award suspension of the delegation of procurement authority when a protest is filed with the GSBCA.
PROC07.1 Repeal statutory limitations on subcontracting and substitute regulatory limitations to provide greater flexibility.
PROC07.2 Authorize civilian agencies to conduct small disadvantaged business set-asides.
PROC07.3 Permit state and local governments to substitute descriptions of their own programs for subcontracting and exempt monopolies regulated by governmental bodies.
PROC11.1 Strengthen and simplify procurement ethics laws.
PROC12.1 Allow state and local governments, grantees, and certain nonprofit agencies to use federal supply contracts.
PROC12.2 Allow federal agencies to enter into agreements to share state and local government supply sources.
PROC13.1 Make it easier to buy commercial items.
PROC17.1 Authorize the use of a two-phase selection process for certain types of contracts.
PROC18.1 Authorize multiyear contracts.
PROC18.2 Allow contracts for severable services to cross fiscal years.
PROC19.1 Repeal the requirement for commercial pricing certificates and authorize contract awards without discussions.
PROC19.2 Maintain the $500,000 threshold for cost and pricing data requirements for DOD.
PROC19.3 Establish a $500,000 threshold for cost and pricing data requirements for civilian agencies.
PROC19.4 Authorize civilian agencies to use cooperative agreements for advanced research projects.
PROC20.1 Amend the Resource Conservation and Recovery Act (RCRA) to clarify procurement issues that impede achievement of its procurement objectives.

Appendix B:

Accompanying Reports

of the National Performance Review

Changing Internal Culture
Creating Quality Leadership and Management QUAL
Streamlining Management
Control SMC
Transforming Organizational
Structures ORG
Improving Customer Service ICS
Reinventing Processes and Systems
Mission-Driven, Results-Oriented
Budgeting BGT
Improving Financial Management FM
Reinventing Human Resource
Management HRM
Reinventing Federal Procurement PROC
Reinventing Support Services SUP
Reengineering Through
Information Technology IT
Rethinking Program Design DES
Restructuring the Federal Role
Strengthening the Partnership in Intergovernmental Service
Delivery FSL
Reinventing Environmental
Management ENV
Improving Regulatory Systems REG

Agency for International
Development AID
Department of Agriculture USDA
Department of Commerce DOC
Department of Defense DOD
Department of Education ED
Department of Energy DOE
Environmental Protection Agency EPA
Executive Office of the President EOP
Federal Emergency Management
Agency FEMA
General Services Administration GSA
Department of Health and
Human Services HHS
Department of Housing and
Urban Development HUD
Intelligence Community INTEL
Department of the Interior DOI
Department of Justice DOJ
Department of Labor DOL
National Aeronautics and
Space Administration NASA
National Science Foundation/Office
of Science and Technology Policy NSF
Office of Personnel Management OPM
Small Business Administration SBA
Department of State/
U.S. Information Agency DOS
Department of Transportation DOT
Department of the Treasury/
Resolution Trust Corporation TRE
Department of Veterans Affairs DVA

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