Archive

Procurement Reform

Most Americans have known for years that government procurement is a mess. But to get a full appreciation, it helps to work here. Before the reinventing government reforms launched in 1993, the typical federal worker was not trusted to buy so much as a $4 stapler for the office. Only trained procurement specialists were allowed to buy things -- only a trained specialist could understand the rules -- and they would make the buy only if a worker came to them with the forms properly filled out and signed by several bosses up the line -- and even then, only if they thought you deserved whatever was requested.

Buying anything associated with a computer was even worse. Federal workers told us about having to get a dozen signatures, and then waiting a year or more to get a simple PC. When it arrived, it was already obsolete, and it cost more than the new, higher-powered models at Circuit City. To cap off their frustration, federal employees would read in the papers along with the rest of America, that "the procurement system," which did not trust them to buy anything, had gone out and paid $400 for a hammer.

The government's procurement system was enough of a challenge that we decided to double-team it. We got long-time critic of procurement and former Harvard professor of management, Steve Kelman, to lead some government-wide changes, and brought Colleen Preston in from a Congressional staff to lead reform at the Defense Department. Rather than try to explain all the ins and outs of the regulatory changes backed by the National Performance Review -- changes that the Administration has made on its own authority, and changes we have persuaded Congress to enact into law -- let's look at some results.

First, results that benefit the entire government and, of course, the taxpayers who foot the bill:

• Last May, we signed a contract with FedEx for overnight package delivery. A three- pound package, at retail -- $27. For the government, and the taxpayers -- $3.62.
• Long-distance telephone calls: Someone who shops around can make peak-hour long-distance calls for as low as 16¢ per minute. Starting in October, government calls to anyone anywhere in the country will cost about 5¢ per minute. Calls between government agencies are even less, about 2¢ per minute. (2)
• The government used to do over $50 worth of paperwork for every small purchase -- even for something like a $4 office stapler -- and there are millions of small purchases each year. Now, we have gotten rid of the paperwork and we use special Visa cards. What's special? The average American pays from 12 to 18 percent interest, and a yearly fee of up to $50. The government pays no interest, no annual fee, and we earn cash rebates for paying on time.(3)
• Earlier this year, President Clinton signed a new law and an executive order that fixes one of procurement's biggest nightmares: buying computers and other information technology. (4) Under the President's order, agencies will invest in information technology only when there is a clear payback, and they won't be locked into cumbersome contracts that can't keep up with rapidly changing technology. The idea is to buy a little, test a little, fix a little, and do it quick. Now for the Defense Department, which accounts for about three-fourths of the federal government's purchases:
• Remember the $400 hammer? How about a $500 telephone one especially designed for an aircraft carrier. What was so special? It worked even after the ship had sunk. Following changes in the communications system and by challenging every requirement, the Navy determined it could use commercial phones that cost 30 bucks.(5)
• Let's look at socks and underwear (it reminds us of the old days for Customs inspectors). If you were ever a soldier, your GI socks probably fell down because there was no elastic at the top, and they made everything in the washing machine with them turn olive drab. The reinvented Army now issues ordinary, color-fast socks with elastic. The sad-sack socks cost $l.99 a pair -- the nice, new ones cost $l.49.
• Concerning underwear, we think this letter speaks for itself: (6)

In addition to some very important legislative changes, the procurement system only needed a little trust (that workers like Tommy Roland won't steal us blind), some common sense (that Jockey can make decent T-shirts without government instructions), and some shrewd bargaining (just try to find long distance rates as low as 2¢ a minute). That is the heart of the procurement reforms that the National Performance Review recommended in 1993 and that became the basis for three major legislative changes that have been signed by the President: the Federal Acquisition Streamlining Act of 1994, the Federal Acquisition Reform Act of 1996, and the Information Technology Management Reform Act of 1996. President Clinton has gone even further by issuing a variety of directives that enhance and speed the legislative reforms.(8) Trust, common sense, and shrewd bargaining might not sound like a revolutionary formula to fix government procurement. But added all together, our procurement reforms are expected to save $12.3 billion over five years.(9) Pretty good, huh?

By the way, we are not just buying smarter, we are selling smarter, too. The government actually used to give away the incredibly valuable rights to broadcast on certain frequencies. This included radio, TV, cell phones -- you get the picture. Now, the Federal Communications Commission auctions them to the highest bidder. So far, we have taken in $20.3 billion. (10)