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Thought No. 12: “The $500 billion question: an open or closed federal procurement system?”

This week’s FAR and Beyond is Thought No. Twelve of the Thirteen Thoughts for 2013: ”The $500 billion question: an open or closed federal procurement system?”  The answer to this question has profound, long term implications for customer agencies, contractors and the American people

A closed system is one that restricts the number of suppliers to encourage lower prices.  An open system encourages streamlined competition by a broad base of commercial contractors to generate fair and reasonable prices.   Why an Open Federal Procurement System?

An open system puts “commercial back in commercial item contracting.”    An open system eliminates government unique requirements where the costs outweigh the benefits to customer agencies and the American people.  An open system maintains and enhances the flexibility and efficiency of the GSA Multiple Award Schedule (MAS) program, the most successful commercial item contracting vehicle in government.  An open system leverages acquisition resources by eliminating unnecessary contract duplication which increases costs to government, industry and the American taxpayer.  At its core, an open federal procurement system eliminates barriers to entry and embraces competition and technological innovation driven through access to the commercial marketplace.

Consequences of a Closed System

A closed system favors government unique requirements over commercial practices.   A closed system favors “mandatory use” contracting programs that, by their very nature, limit access to the commercial marketplace.  A closed system fails to address contract duplication which increases costs and depletes bid and proposal funds for government and industry.  A closed system favors GSA’s proposed Demand Based Model that would eliminate continuous open seasons under the MAS program thereby limiting access to the commercial marketplace for customer agencies.   A closed system focuses solely on price rather than total acquisition cost and best value in measuring success.

The end result of increased barriers and transactional costs in a closed federal procurement system is a much more limited supply chain for customer agencies.  A limited supply chain reduces competition for commercial products, services and solutions.  A limited supply chain reduces access to commercial innovation and best value solutions that support customer agency missions.  There is broad consensus among acquisition professionals that increased access to the commercial marketplace streamlines processes and has saved money for the American taxpayer.   For that reason the Federal Acquisition Streamlining Act of 1994 created commercial item contracting as currently implemented at FAR Part 12.  Increasingly, however, doing business with the federal government has gotten more difficult for commercial firms.  Government unique clauses/requirements, including data collection and reporting requirements, are included in commercial item transactions—rendering the term “commercial item contracting” less and less relevant to the federal acquisition system.  These government unique requirements increase transactional costs that are ultimately passed on to the customer through higher prices and/or reduced competition.

Interestingly, some impacts of a closed acquisition system are starting to be reflected in the GSA Office Supply Schedule.   For almost 2 years now the schedule has been closed to new offers while at the same time GSA has been implementing FSSI BPAs for office supplies on a government wide basis.  Recently, GSA began planning for the next FSSI procurement for office supplies and sought industry feedback through an industry day held last month in New York City.  Currently, GSA is contemplating creating an entirely new set of IDIQ contracts, outside the MAS program, for the FSSI office supplies procurement rather utilizing the MAS program as the platform.  A key rationale for considering such an approach is that the schedule may no longer offer maximum competition for the next generation of FSSI because it has been closed since 2010.  If GSA chooses this path, the closing of the MAS schedule would result in a prolonged, costly open market procurement that duplicates what is already available via the MAS program.

The irony is that the American taxpayer cannot afford this duplication in the Federal space! The Coalition will continue a Myth-buster’s dialogue with others in the acquisition community to ensure that the procurement system remains open and leverages the commercial marketplace to provide cost efficient innovative services and solutions to agencies.  We look forward to working with GSA and other stakeholders to keep an open Federal procurement system that maximizes access to the latest innovation and opportunities for both small and large businesses.

Roger Waldron


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