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Category Management and Service Contract Provisions in the FY 2017 NDAA


On May 26, Senator Tom Carper (D-DE) submitted several amendments to S. 2943, the Fiscal Year (FY) 2017 National Defense Authorization Act (NDAA). This week’s blog will examine two of these provisions which are of significant interest to the Federal contracting community.  They are proposed Section 829K, “Simplification of the Process for Preparation and Evaluation of Proposals for Certain Service Contracts,” and proposed Section 829N, “Category Management.”

Section 829K: This provision would allow prices to be established through competition for specific requirements at the task order, rather than the contract, level for services that are the same or similar. Specifically, when issuing a solicitation, heads of agencies would have the discretion not to include price or cost as an evaluation criterion for contract award.

The establishment of a so-called “unpriced” Schedules contract for services has long been a position advocated by the Coalition. As set forth in several FAR & Beyond blogs and the Coalition’s 2013 MAS White Paper, this reform effort would streamline the procurement process, enhance competition, and empower the Federal government to leverage technology and improve its efforts to meet end mission goals.  Further, this reform would represent common sense procurement policy. Buying practices, especially for services, of government and commercial buyers are different. Altering acquisition policy to reflect and accommodate these differences is a positive, appreciated step forward.  For these reasons, the Coalition applauds Senator Carper for his leadership and support for the innovative acquisition approach reflected in this provision.  Should it be enacted, the Coalition is ready to assist our government partners in finding similar opportunities to modernize Federal procurement policies to better reflect the realities of the market.

Sec. 829N: Under this provision, the Office of Management and Budget (OMB) would be required to issue guidance to support executive agencies in their implementation of category management. At a minimum, this guidance would address:

  • The use of data analytics, best practices, and market understanding
  • Reducing contract duplication for the same or similar requirements
  • Data collection
  • ”Strengthening demand management practices”
  • Meeting policy objectives associated with socio-economic, sustainability, and accessibility
  • The roles and responsibilities of OMB, GSA, and other agencies in furthering category management principles and practices
  • Performance metrics for category management
  • Adding to CAO authorities establishing and overseeing a category management program

At the outset, it is important to recognize that the category management initiative, as currently constituted, is barely more than a year old.  It is not clear how much objective data exists to support institutionalizing it in statute.  Notwithstanding how much data exists, however, as its name suggests, it is a tool for managing.  Recognizing that management and its associated tools can evolve over time, it is unclear whether it is appropriate for setting forth in statute.  Indeed, doing so could increase government risk by limiting its ability to adjust to new, innovative management paradigms that evolve over time, as doing so may require an act of Congress.

Establishing a management structure in statute, especially for the multiple, diverse enterprises that constitute the federal government, also raises the risks associated with centralization that the government encountered in a bygone era of procurement policy. By way of example, prior to the enactment of the Federal Acquisition Streamlining Act (FASA) and the Clinger-Cohen Act, the government centrally managed the procurement of IT resources pursuant to the Brooks Act of 1965. By the early 1980s, however, the efficiency and practical utility of that approach came under intense scrutiny.  Congress recognized that some unique requirements necessitated flexibility to achieve end-mission goals, flexibility that could not be provided through the existing centralized process, and in the Warner Amendment to the NDAA for Fiscal Year 1982, it enacted an exceptions to the process for certain DoD IT purchases. Ultimately, the administrative cost and delay of the existing process, the evolution of technology, and the need for rapid acquisition in a dynamic environment led to many of the changes included in the aforementioned reforms of the 1990s, including the repeal of the centralized process under the Brooks Act.

The Coalition does not mean to suggest that, in the face of current acquisition challenges, the correct analytical approach to addressing procurement shortcomings is rooted in a simplistic centralize-decentralize decision.  We know that some element of centralization, and by extension, category management, can bring benefits to the government, but implementation and context are critical.  Implementation has to be understood and shaped in the context of agency mission drivers and the requirements, the foundational elements of any procurement, that flow therefrom.

Agencies, under the review of OMB, already are supposed to determine, before making an investment in a new information system to support a function, whether the function should be performed or supported by the private sector or another agency.  Likewise, IT capital planning and control are managed and aligned with agency mission goals via the Exhibit 300 and Exhibit 53 process, and OMB uses this process to determine whether the programs and associated budgets are consistent with the Administration’s priorities and OMB policy.  Before locking category management in statute, it would be helpful to identify and understand any shortfalls in the existing budget-linked capital planning process, or other associated processes, to ascertain how category management will address these shortfalls, and to discern how that management structure will coexist within the existing procurement process.

The Coalition has other substantive language concerns with this provision, but, at bottom, based on the aforementioned discussion, we believe this provision needs further analysis and substantive support.  Notwithstanding these concerns, however, the Coalition sincerely appreciates the leadership showed here, as it manifests a continuing commitment to positive change.  We are most grateful for the proposal to make clear the authority to accept “unpriced” Schedules contracts for services, and we are thankful for the dialog that is promoted on category management.  For these and other initiatives, the Coalition and its members stand ready to assist members of Congress, as well as Federal acquisition leaders, in developing common sense procurement policies that help move Federal contracting into the future.



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