April 1997 Draft
Until recently, the Federal procurement process has been controlled by a maze of rigid laws and regulations that caused delay, consumed resources, hindered innovation, and made it difficult for agencies to contract with suppliers committed to delivering good quality at competitive prices. The Administration's high level of commitment to reinventing the procurement process has helped to bring about the most significant reform of acquisition laws and practices in the past decade.(1) These changes are transforming the procurement system into one that relies less on bureaucracy (including overly disruptive and costly litigation to review contract award decisions) and more on streamlined, customer-oriented practices that will enable agencies to deliver better value to the taxpayer.
Following are brief descriptions of some of the more significant newly available procurement flexibilities and some potential statutory flexibilities PBOs may wish to seek if they can improve their operations.
CURRENTLY AVAILABLE FLEXIBILITIES
Agencies can reduce costs by using purchase cards to make buys under $2,500. Recent changes to procurement law have now made it possible for government personnel to use government bank cards (or "purchase cards") to make purchases under $2,500 (known as micro-purchases). Agencies are permitted -- and, in fact, encouraged -- to furnish purchase cards to their technical, program, and administrative employees to make purchases directly from suppliers. Use of the purchase card not only results in reduced administrative lead times for micropurchases, but it also frees up agency procurement staffs to focus on more complex, larger purchases. Both of these benefits translate into a procurement system that can be more responsive to the needs of the agency.
A September 1994 report issued by 10 agencies who pledged to increase the use of the government purchase card indicated than an estimated $54 per transaction can be saved by using the purchase card rather than following the traditional approach of having the contracting office issue a purchase order. It reduces the paperwork involved in purchasing and, because it functions like a typical commercial credit card, allows businesses to be paid faster.(2)
Agencies may streamline their procurement processes by using simplified procedures to conduct a broader range of acquisitions. Until recently, general relief from many of the procedural formalities required when obtaining competition has been available only for purchases under $25,000. Changes in the law have expanded this relief to all purchases under $100,000 and, under a three year test program, to commercial item acquisitions up to $5,000,000.(3) These simplified procedures provide agencies with greater flexibility in evaluating interested sources. Among other things, they: (1) reduce the degree of regulation regarding the conduct of discussions during the negotiation process, (2) permit the use of less detailed and more informal evaluation schemes, and (3) encourage the use of simplified documentation practices. In addition, agencies have been given permanent authority to shorten the current synopsis "notice" and "wait" periods when buying commercial items in any dollar amount. Taking greater advantage of these authorized flexibilities -- especially when buying commercial items -- can save agencies the time and expense of designing detailed evaluation schemes to analyze lengthy proposals, and save vendors the cost of describing in a detailed proposal what can be effectively communicated through customary commercial marketing tools (such as existing product literature and samples).
Agencies can make timely buys of quality off-the-shelf products and commercial services through GSA's Federal Supply Schedule Program. Through its Federal Supply Schedule Program, GSA makes available to agencies millions of quality state-of-the-art commercial products and related services, at volume discount pricing. Recent changes to the program are making it an increasingly attractive option for obtaining commercial goods and services in a timely manner at the best value. Enhancements include: (1) the introduction of "GSA Advantage", an electronic catalog that will maximize item visibility, facilitate customer learning about available products, and simplify the ordering process; (2) the ability to negotiate spot pricing and special discounts with vendors; (3) the ability to order in larger quantities; and (4) the elimination of tedious review and justification procedures previously required when making a best value purchase.(4)
Agencies may better ensure the selection of dependable suppliers offering quality products and services at good prices by relying more heavily on past performance. Traditionally, government agencies have attempted to select quality contractors through extensive evaluation of detailed proposals describing how the work will be done and the management systems that will be used to ensure good performance. This approach is laborious and costly both for the government and its suppliers. By contrast, commercial firms routinely identify high quality contractors much more easily and with less expense by relying heavily on information about a contractor's past performance.
Accordingly, agencies can streamline and better ensure the selection of quality contractors by reducing their reliance on detailed proposals and increasing their reliance on a contractor's demonstrated performance record, including customer satisfaction.(5) Recent government experience suggests that greater use of past performance motivates contractors to perform better and can reduce the level of necessary contract administration and oversight. A survey of participants on a recently completed pilot effort by the Office of Federal Procurement Policy to increase the consideration of past performance on 60 contracts valued in excess of $2 billion indicated that customer satisfaction with contractor performance increased an average of 21 percent.
Agencies may take better advantage of market dynamics by issuing multiple award task and delivery order contracts. In the past, agencies have attempted to ensure timely delivery of the latest products by placing orders with a single vendor under long-term delivery order contracts. For services, agencies have relied on large single-award umbrella contracts with broad scopes of work to direct timely performance of specific tasks through the issuance of orders. While these methods have afforded agencies some relief from the unwieldy delays of the federal buying process, they have failed to provide the same price reductions and improved contractor performance that would occur if vendors were competing for business in real time.
Thanks to recent clarifications in the law and regulation, agencies can confidently combat this problem by making multiple awards and conducting informal, quick competitions just among the awardees.(6) This ongoing competitive pressure between the multiple awardees can help agencies to secure better prices and quality than they would get if they had to negotiate on a sole source basis with a single contractor. Moreover, an informal, quick competition can ensure more timely delivery than would be the case if an agency attempted to award a new contract. Not surprisingly, this contracting method may be especially beneficial when acquiring goods and services in markets that change rapidly, such as the information technology market.
Agencies may reduce the time needed to evaluate proposals by requesting that vendors make oral presentations. Some agencies are beginning to require that potential suppliers orally present certain portions of the offers that will not become part of the contract. For example, offerors could be asked to provide information about their capabilities through an oral presentation by the key members of their team that would likely perform the work. This technique can reduce negotiation time as well as the costs incurred by suppliers in preparing proposals. One civilian agency estimated that oral presentations saved from eight to 12 months in negotiating time on a multi-million dollar service contract. Firms bidding on the project reported significant reductions in their costs of preparing proposals.(7)
Agencies may reduce proposal evaluation costs by advising interested suppliers of their chances for award before evaluating detailed proposals. Most agencies have come to realize that there is great time and cost involved with seeking and evaluating formal proposals as a means of initially determining which sources are the most competitive. Much of this burden could be avoided by conducting a "two-phase" selection process where competition is initiated with a streamlined process that avoids the submission of formal proposals detailing an offered solution ("phase I") and from which a limited number of sources are selected to submit formal offers as part of a further competition ("phase II"). This result can be achieved by requiring that interested sources limit their initial submission to information on capabilities, experience, past performance (including past performance on pricing or cost control), and any additional areas specified by the contracting officer. Based on this limited information, the government would advise sources of how competitive they are likely to be for award. While all sources could still submit full proposals after receiving this advice, most who receive discouraging advice would be unlikely to participate further. As a result, those advised against further participation could save the wasted effort of developing proposals that would not likely be selected and agencies could save the time and resources of evaluating them.(8)
Contracting officers can rely with greater confidence upon their discretion and good business judgment to make decisions. Rigid regulatory rules and second-guessing, especially on procurements for information technology, have discouraged contracting officers from using the sort of innovation and creativity that commercial firms rely upon routinely to effectively meet their needs. However, with recent changes in the law, disappointed offerors seeking extra-agency administrative review will only be able to seek redress at the General Accounting Office. This forum presently conducts reviews in a relatively informal, nonintrusive fashion to minimize delay to the acquisition process. As a result, contracting officers can now feel more confident in taking advantage of the flexibilities currently available to them, provided that their decisions are rationally based.
POTENTIAL NEW STATUTORY FLEXIBILITIES
Title III of the model PBO legislative language in Appendix A addresses the procurement flexibilities that would be available to Performance-Based Organizations (PBOs). So that
PBOs have the fullest opportunity to deliver the best value and service to the taxpayer possible, the template would provide additional flexibilities, building on those that have been provided governmentwide in the Federal Acquisition Streamlining Act and the Clinger-Cohen Act (formerly called the Federal Acquisition reform Act and the Information Technology Management Reform Act).
Questions and comments regarding this appendix may be directed to Matthew Blum of OFPP at (202) 395-4953 (fax: (202) 395-5105).
1. Many of these changes are contained in the Federal Acquisition Streamlining Act of 1994 (P.L. 103-355), and the Clinger-Cohen Act of 1996 (P.L. 104-106, Divisions D and E, formerly known as the Federal Acquisition Reform Act of 1996 and the Information Technology Management Reform Act of 1996.
2. Additional information on the use of the purchase card may be obtained by calling the Department of the Treasury at (202)622-0203.
3. Authority to use simplified acquisition procedures is contained in the Federal Acquisition Regulation (FAR) at Part 13 (48 C.F.R. Ch. 1, Part 13). The authority to use these procedures on a test basis for the acquisition of commercial items in amounts up to $5 million is set forth at FAR Subpart 13.6. (In this regard, it might be noted that the statutory flexibilities proposed in Appendix A for PBOs would remove the limitations placed on this authority and permit a PBO to use it as implemented in the FAR without regard to any dollar limitation or expiration.)
4. Additional information about enhancements to the Federal Supply Schedules is available from the Federal Supply Service, which can be reached at (703) 305-6566.
5. The Office of Federal Procurement Policy (OFPP) has issued A Guide to Best Practices for Past Performance. Copies may be obtained by calling OFPP at (202) 395-6803 or faxing requests to (202) 395-5105.
6. For general guidance on the use of delivery order and task order contracts, including the issuance of multiple award contracts, refer to subpart 16.5 of the FAR (see, in particular, FAR 16.504). OFPP will be issuing a best practices guide for task and delivery order contracting in the near future.
7. The Procurement Executives Association recently issued Guidelines for the Use of Oral Presentations. A copy of this guide may be obtained by calling OFPP at (202) 395-6803 or faxing requests to (202) 395-5105.
8. The flexibilities in this appendix increases the viability of this practice by giving agencies the authority to limit participation in the second phase to just those that have the greatest likelihood of receiving award.
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