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Procurement Reform

Pity football's offensive linemen. Though the backbone of a good offense, they toil in near obscurity, performing the grunt work of pass-blocking while quarterbacks, running backs, and receivers bathe in glory.

The grunt work of football is not unlike the grunt work of government. A good example is procurement reform, according to Senator John Glenn, chairman of the Senate Governmental Affairs Committee, who is among those who have championed the issue. You don't get much credit, but the work is vitally important.[5]

Vital, indeed. Like most of its red tape, the government adopted page after page of procurement rules with the best of intentions. Hoping to prevent profiteering and fraud, it adopted rigid safeguards that give federal managers little flexibility to buy what they need. Hoping to prevent favoritism, it adopted competitive bidding.

But the system is a relic of an earlier economic age, one unsuited to contemporary realities. Today, federal managers could buy what they need, at low prices, from mail-order discounters. And, even while retaining competitive bidding, the government surely should begin to factor in the past performance of contractors as it awards future contracts.

As the Vice President said,

Too often suppliers who give us good products and services at good prices never hear from the federal government again. We're going to change that and give good suppliers business again and again. And those who don't produce are the ones we'll stop calling. [6]

Early in the Administration's efforts to implement NPR, President Clinton revolutionized the federal procurement process with the simple stroke of his pen: Last October, he signed a memorandum through which the executive branch, by January 1997, will implement to the greatest possible extent a government wide electronic commerce acquisition system. All aspects of procurement--ordering, invoices, payments, and so on--will change from a paper-based to an electronic system for small purchases. The directive not only will cut costs but present a host of possibilities for small business to solicit work from the government. It also will cut the procurement process from three weeks to five days.

Also on the procurement front, many agencies are working on government wide efforts, and some are taking steps on their own. Across the government:

20 agencies are participating in a voluntary pilot program to consider a supplier's past performance when awarding future contracts.

24 agencies have pledged to increase their use of alternative dispute resolution (ADR) in contract disputes, and some even have specified multi-billion-dollar contracts to which they will apply ADR.

In another cross-agency venture, the General Services Administration, headed by Roger Johnson, wants to make purchase cards widely available. Early this year, GSA signed a contract with Visa under which the government will pay no fees and get rebates on some of the purchases it makes. Using the card, the government saves an average of $50 on every small purchase.

Last year, 10 agencies pledged to double their use of purchase cards by October 1, 1994. They already have done so. Because those 10 agencies make about a million transactions a year with the card, they are saving the government about $50 million. The Administration plans to switch at least five million purchases to purchase cards, thus increasing the savings to $250 million a year.

Some agencies are taking steps on their own to streamline procurement. Perhaps the most important is the Defense Department, which "spends more than 75 percent of the federal government's $200 billion annual procurement budget"[8] but is saddled with rules that keep it from acquiring state-of-the-art technologies.

Defense Secretary Perry signed an order in late June to reduce the Pentagon's reliance on military specifications. In a move that he said would save billions of dollars, Perry directed the department to allow contractors to make greater use of commercial items in the equipment they sell the government. He predicted that, freed from the burdensome "mil specs," more contractors will seek defense work.

Perry views procurement reform as vital to the Pentagon's efforts to meet its spending plans over the next five years. Although the Pentagon faces the prospect of declining budgets, it also plans a major increase in weapons procurement, beginning in fiscal 1997.[9]

Other agencies taking steps on their own include:

The Energy Department, which is using performance-based service contracting; it tells contractors what it wants to accomplish up front, rather than signing a vague contract and just paying the bills as they come in.NASA, which is studying its suppliers' performance and focusing more on controlling costs.

In addition, Congress has made great progress toward more fundamentally transforming the procurement process. In June, the House and Senate both passed legislation to simplify procedures for contracts of less than $100,000 and for contracts involving commercial products.

The final bill, which has emerged from a House-Senate conference committee, would remove the remaining barriers to deregulating purchases of below $2,500. Agencies will be able to buy what they need from such stores as Staples or Home Depot. Small purchases account for 70 to 80 percent of government purchases (though just 2 percent of their value). In addition, the final bill will ultimately extend the streamlined process of buying items of up to $25,000 to items of up to $100,000. It also will enable government to buy commercial items more easily.

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