Yesterday I testified in a hearing titled “Putting the Strategy in Sourcing: Challenge and Opportunities for Small Business Contractors” before the House Small Business Subcommittee on Contracting and Workforce. My oral statement to the subcommittee is provided below.
The Coalition will continue to work on the strategic acquisition issues identified during the hearing on behalf of our members. In particular, the Coalition is committed to working to maintain the GSA Schedules program as the most successful commercial item acquisition program in government—success that is founded upon openness and access to the commercial marketplace that delivers competition and best value for customer agencies, companies and the American people. Members who would like to read the written testimony that was submitted for the record or watch the hearing, click here.
Oral Statement before the
House Small Business Subcommittee on Contracting and Workforce
June 13, 2013
Chairman Hanna, Ranking Member Meng, and Members of the Subcommittee, thank you for the opportunity to appear before you to address “Putting the Strategy in Sourcing: Challenge and Opportunities for Small Business Contractors.”
The Coalition is a non-profit association of firms selling commercial services and products to the Federal government. Coalition members include small, medium, and large business concerns from across the commercial marketplace. Coalition members account for approximately 50% of the commercial solutions purchased annually by the government and focus much of their access to the federal marketplace through their GSA schedule contracts.
Effectively used, the GSA schedules program is a highly successful strategic source for the government to leverage the marketplace and achieve its socio-economic goals.
Year in and year out, the GSA schedules program is one of the most successful government-wide small business contracting programs available. In a typical fiscal year, over 30 percent of the dollar volume of purchases under the MAS program goes to small business concerns.
The fundamental keys to the success of the schedules program for small business are: (1) Continuous open seasons; and (2) ordering procedures and electronic tools that allow customer agencies to consider socio-economic status when competing and placing orders.
MAS and Strategic Sourcing
Although the Coalition generally supports the government’s strategic sourcing efforts, we have a number of concerns about the impact of GSA’s current acquisition strategies on businesses of all sizes, but particularly on small companies.
Last year GSA proposed a Demand Based Model that would have eliminated continuous open seasons under the schedules program. The Coalition submitted comments opposing the closure of the GSA schedules program to new offers. A copy of our comments is attached to our written testimony. Coalition members remain uniformly opposed to closing the GSA schedules program to new offers, as it would limit opportunities for small businesses, restrict competition, and inhibit access to commercial innovation by the government. We are concerned that GSA’s strategic sourcing initiatives are being used to implement the Demand Based Model’s closure of GSA schedules to new offers.
Mandatory Use
At the same time, the government is moving towards a mandatory use contracting model for Blanket Purchase Agreements under the GSA schedules program. Mandatory use will have the unintended, long-term consequence of reducing opportunities for small businesses. By its very nature, mandatory use limits access of the federal buyer to a small group of contractors. Mandatory use will restrict access to the federal marketplace by small businesses.
Rather than imposing mandatory use terms as a means of leveraging the government’s volume, the Coalition supports use of volume commitments or guaranteed minimums that are based on improved requirements development which is commercial practice. Volume commitments create the economic incentives to offer lower prices for their commercial solutions. At the same time, the government maintains flexibility to access the commercial marketplace and compete opportunities for small business. It is a win-win for government and industry!
Generic Government-wide Blanket Purchase Agreements
The Coalition also is concerned that the current approach to strategic sourcing includes the use of generic, government-wide Blanket Purchase agreements under the GSA schedules program—agreements that do not include specific requirements or volume commitments upon which effective competition can be based.
The intermediate step of establishing such agreements results in vertical contract duplication that increases bid and proposal costs for both government and industry.
These agreements should be eliminated to the maximum extent practicable. Agencies should compete task orders or establish Blanket Purchase agreements under the schedules program based on their specific requirements, including volume commitments. This approach will enhance rational, realistic competition, competitive pricing, and improved efficiency. A program of agency specific Blanket Purchase Agreements established using GSA schedules will also provide greater opportunities for all small business concerns.
Summary
In summary, when effectively used GSA schedules program is a highly successful strategic source for government. GSA Schedule contracts are also powerful marketing tools for small business concerns when dealing with contracting offices across federal, state, and local governments.
However, it appears that rather than focusing on the strengths of the program: (1) its openness and access to the commercial marketplace; (2) its flexible, streamlined, ordering procedures and electronic tools, the current strategic sourcing approach closes the GSA schedules marketplace, reduces competition and limits access to commercial solutions and to small businesses.
The Coalition for Government Procurement is pleased to submit its written testimony for the record. We stand ready to provide you with any additional input at your request. Thank you.
Roger Waldron
President
Coalition Testifies on Strategic Sourcing and Small Business
On June 13, The Coalition for Government Procurement testified during a hearing titled “Putting the Strategy in Sourcing: Challenge and Opportunities for Small Business Contractors” before the House Small Business Subcommittee on Contracting and Workforce. Coalition President, Roger Waldron, joined an industry panel with representatives from The Professional Service Council (PSC), TechAmerica, and Venable LLP. In the Coalition’s testimony, Waldron described the GSA Schedules program as a highly successful strategic source when effectively used and one of the most successful procurement programs for small business. He expressed concern that mandatory use of generic government-wide Blanket Purchase Agreements for strategic sourcing restricts the ability of small businesses to compete and reduces the market to a limited number of contractors. GSA and the Office of Federal Procurement Policy also participated in the hearing. The government panel was represented by the Administrator of Federal Procurement Policy, Joe Jordan, and Jeff Koses, Director of the Office of Acquisition Operations at GSA. Both OFPP and GSA described increasing opportunities for small business as a primary objective of the government’s approach to strategic sourcing. To watch the hearing or read the written testimony provided by the witnesses, visit http://smallbusiness.house.gov/calendar/eventsingle.aspx?EventID=326714.
House Oversight and Government Reform Chairman Darrell Issa (R-CA) plans to offer Federal IT Acquisition Reform Act (FITARA) as an amendment to the 2013 Defense Authorization bill. FITARA aims to update federal IT laws and provide agency chief information officers more authority. It also includes a stipulation that requires agencies to have only one person with the title of CIO. The bill would additionally make the CIOs at 16 of the largest agencies presidential appointees. These presidential appointees would no longer require Senate confirmation. The Coalition remains concerned about several aspects of the bill and will keep members up to date on the progress of FITARA through the committees and the Friday Flash.
Register for In-House Counsel Training, June 27
Registration is open for the Coalition’s General Services Administration (GSA) Schedule Contracting for In-House Counsel training on June 27, 2013. Attendees can earn 6 Continuing Legal Education credits (CLEs) for the course with the Virginia State Bar.
GSA Schedule Contracting for In-House Counsel Training
June 27, 2013 8:00 am
McKenna Long & Aldridge LLP
1900 K St NW
Washington, DC
About the Course:
This GSA Schedule Contracting for In-House Counsel training will provide information and tools to help you understand the GSA/VA Schedule contracting program and provide insightful legal advice to your in-house client.
The GSA Schedule, including the delegated VA Schedules, is a $50 billion contracting program that all federal agencies use to acquire commercial services and products. These multiple year, government-wide contracts cover professional services, information technology, pharmaceuticals, medical equipment and a vast array of commercial products.
Schedule contracts offer a huge market opportunity. Thousands of companies including both Fortune 500 companies and a vast number of small businesses have GSA/VA Schedule contracts. All federal agencies, and in some instances state agencies, can place orders against the contracts.
Of particular interest to in-house counsel, Schedule contracts have a pricing methodology, and disclosure requirements that are unique in federal government contracting. The contracts provisions must be correctly understood, managed and monitored to assure that your company realizes anticipated profits. Failure to do so can result in significant monetary, administrative, civil and even criminal penalties.
On June 11, Jim Ghiloni, Director of the GSA OASIS program, posted an update on the contract vehicle to Interact. Jim explained that, “After reviewing the comments and suggestions from industry, we checked in with our Customer Working Group to discuss the key issues which had emerged from the response to the draft RFPs.” Taking the comments into consideration, GSA is now working to finalize the RFPs and other acquisition documents, such as the Acquisition Plan and Source Selection Plan. Jim Ghiloni also informed industry that in the next week or so they will see revised draft RFPs, which considered all and agreed with some of the comments that were submitted by the public. Jim Ghiloni is issuing a “last call” for industry comments since GSA will begin moving toward issuance of the final RFPs once the revised drafts have been posted. Ghiloni says that he’s confident that GSA is making substantial improvements to the acquisition and that industry will see that reflected in the revisions. GSA is hopeful that the final RFPs will be released in July.
GAO: Eliminate Duplicative IT Programs
The GAO released a report this week that asserts that OMB and agencies need to focus continued attention on eliminating duplicative investments. GAO has identified issues related to IT duplication across government. GAO found that from a sample of 810 investments in the Departments of Defense (DoD) and Department of Energy (DOE), 37 were potentially duplicative. According to the report, these investments accounted for about $1.2 billion in total IT spending for fiscal years 2007 through 2012. GAO recommended that the DoD and DOE increase transparency and report on the progress of efforts to identify and eliminate duplication, where appropriate. Both agencies agreed with the recommendations.
Anne Rung to Lead GSA Governmentwide Policy
Acting GSA Administrator Dan Tangherlini has announced that Anne Rung will lead GSA’s Office of Governmentwide Policy (OGP). Anne Rung, chief acquisition officer, will replace Kathleen Turco who is moving to the Veterans Health Administration to serve as chief financial officer. Anne Rung will also continue in the position of chief acquisition officer at GSA. In an interview with Federal News Radio, Acting Administrator Tangherlini said that “Anne has been a vital part of our agency since April of last year, serving as our chief acquisition officer and a senior adviser to me on a number of issues. She brings extensive experience in public service at both the state and federal level.” The Coalition congratulates Anne Rung on her new assignment and looks forward to also working with her at OGP.
Tangherlini Confirmation Hearing, June 18
The Senate Homeland Security and Governmental Affairs Committee has scheduled a hearing for Tuesday, June 18, to consider the nomination of Daniel Tangherlini to serve as the next General Services Administration (GSA) Administrator. The hearing will begin at 10:30 a.m. in Room 342 of the Dirksen Senate Office Building.
More Government Guidance on Conferences
The Chief Financial Officers (CFO) Council issued a Controller Alert this week on Federal employee travel and participation in conferences. The alert provides more details concerning a May 11, 2012 memo from OMB that outlined new policies for Federal agencies to follow when hosting or attending conferences. The CFO Council’s alert recognizes that while Federal agencies must curtail travel and conference-related activities, there are circumstances in which physical collocation is necessary to support agency missions. Collaboration in the scientific community and unique training for law enforcement were provided as examples. The CFO Council also recognizes that there are agencies that rely on meetings with industry and academic colleagues in order to drive innovation and ensure continued advancement in their fields. As such, the Council advises that each agency decide what type of travel and conferences are mission-critical and ensure that any related spending is used efficiently and effectively. The Council also advised that agencies and associated stakeholders should anticipate a continued reduction in conference and travel activities into the next fiscal year.
NASA IG Encourages More Centralized IT Governance
The NASA Office of Inspector General (OIG) released a report this week recommending that NASA revamp their Information Technology (IT) governance model and move from a decentralized IT system to a more consolidated, centralized structure. In the IG’s review, they found that the NASA CIO had little control and visibility over the majority of NASA’s IT budget. Although planned IT expenditures for FY 2010 were $1.6 billion, NASA actually spent $2 billion. Due to NASA’s decentralized system, the CIO was unaware of the $400 million in additional spending until the Mission Directorates reported actual expenditures to the CIO’s office in a data call responding to an OMB request. The IG has suggested that NASA centralize IT so that the CIO has more authority over IT budgets and resources agency-wide.
Should We Protest? Recent Data from The Government Accountability Office Helps Answer the Question
By Jack Horan, Partner, McKenna Long & Aldridge LLP
Many factors go into a decision of whether to protest after a contractor finds out it was not successful in winning an order or contract:
- Did the agency make a mistake?
- How strong is my evidence?
- Did the mistake affect the award decision?
- How much will a protest cost?
- Will a protest affect my relationship with the agency?
- If I win the protest, what remedy will the General Accountability Office (“GAO”) recommend?
For a contractor to make a reasoned decision on whether to protest, including a schedule contractor competing for commercial items sales, the contractor has to have some measure on the likelihood of success of a protest. Recent data and analysis provides valuable context on GAO protest decisions that will assist contractors in making this important decision. An annual report by the GAO, GAO Bid Protest Overview, GAO-13-404SP, Feb 20, 2013, authored by Ralph White, Managing Associate General Counsel, provides useful information on the results of bid protests over the past five years. An article written by Professor Dan Gordon, Associate Dean for Government Procurement Law Studies at The George Washington University Law School, digs a little deeper into GAO’s statistics, and looks at the number of protestors that actually win the contract after protesting.
According to GAO’s Bid Protest Overview, GAO closed 2,495 bid protest cases in 2012, issuing a decision in 570 cases, or approximately 23% of the closed cases. Of those cases that go to a decision, GAO sustained 106 protests, or approximately 18.6% of the 570 decisions. “Sustained” means the GAO agreed with the protestor that the government had made a material error in the procurement, and GAO recommended that the government take action to address its error.
GAO also calculated the success rate of protests, defined by GAO as when the protestor obtains “some form of relief from the agency, as reported to GAO, either as a result of voluntary agency corrective action or our Office sustaining the protest.” By this measure, protestors achieved success in 42% of the closed protests for that year. The 2012 success rate was representative of previous years, which ranged from 42% to 45% from 2008 to 2011. In short, protestors have done fairly well over the past five years according to the GAO’s view of success, achieving either a sustained protest or voluntary corrective action in at least 42% of the cases.
In his article, Bid Protests: The Costs Are Real, But the Benefits Outweigh Them, which will appear in the Spring 2013 issue of the Public Contract Law Journal, Professor Gordon digs a little deeper into GAO’s statistics, analyzing, among other issues, the percentage of protestors that received award of the contested contract after the protest. Reviewing the protests in 2010 that were sustained, Professor Gordon was able to determine the final results in 40 cases:
- nine contracts awarded to the protester;
- 18 contracts awarded to an offeror other than the protester;
- one case where the GAO granted the specific relief (other than contract award) requested by protestor;
- three procurements cancelled; and
- nine cases where the agency did not take corrective action.
Thus, of 27 cases that ended in the award of a contract, the protestor received the contract in nine cases, or one-third of the awards. In another case, the GAO recommended, and the government provided, the relief the protestor requested. Thus, in 25% of the 40 known results, the protestor received the final result it sought – nine contract awards and a tenth case where the protestor received the relief it sought. In addition, using a broader definition of “success,” protestors received award of the contract in nine of the 31 cases where the government took corrective action of some type (or 29% of the cases).
Professor Gordon did not attempt to extrapolate his findings based on known cases to the bulk of protests where results were not known. Others have attempted an extrapolation, at least one unsuccessfully and reaching inaccurate results. See Miller, Protests rarely result in U.S. contract reversals,study shows, Washington Post, March 11, 2013, available at http://goo.gl/iSb2o (concluding that less than one percent of protests filed in 2010 resulted in award to the contractor). A reasonable extrapolation of Professor Gordon’s analysis demonstrates that protestors have been successful even by Professor Gordon’s measure. See Papson, Carey and Meier, FEATURE COMMENT: The Odds Of Winning A Contract After Protesting Are Higher Than You Think, The Government Contractor, Vol 55, No. 16 (April 24, 2013). Applying the 29% success rate of award after corrective action from Professor Gordon’s data to the total number of protests in 2010, protestors won award of the contract after 12.2% of the total protests filed in 2010 (extrapolated). In light of such factors as the strength of the protest, the level of competition for the final award, and that the government deemed another offer to be the winner in the first instance, a success rate of approximately one in eight seems reasonable.
So, what is the takeaway from all of these numbers. By any measure, protests are successful. If the measure of success is ensuring that all offerors had a fair chance of award (my personal view), GAO statistics demonstrate that protests resulted in corrective action – specifically intended to make sure the rules of the procurement are fair and legal – at least 42% of the time in the last five years. By Professor Gordon’s more narrow measure – whether the protest resulted in the protestor obtaining the contract – more than 12% of protestors achieved success in 2010. Keep in mind that both of these results are based on all of the protests filed during the respective periods – some terrible, some very strong. With experience, or the assistance of an experienced protest lawyer, these numbers provide a useful benchmark for analyzing the likelihood of success of a specific protest evaluated on the merits.
More Biobased Products Receive Procurement Preference
The U.S. Department of Agriculture (USDA) published a final rule this week designating eight new categories of biobased products to receive Federal procurement preference. These categories are: aircraft and boat cleaners; automotive care products; engine crankcase oil; gasoline fuel additives; metal cleaners and corrosion removers; microbial cleaning products; paint removers; and water turbine bearing oils. The final rule also adds a countertops subcategory to the existing composite panels product category. USDA invites manufacturers that provide biobased products within these categories to provide information about the product on its BioPreferred website at www.biopreferred.gov.
Register for Q4 Unveiled! Federal Spending and Market Outlook, June 27
Webinar
12:30 pm
This webinar comes just in time to help identify end of year business opportunities for your company. Please join the Coalition for Government Procurement in a discussion of federal spending and market outlook for the end of the Government’s 2013 fiscal year. This dialogue will cover FY13 budget execution, including burn rate and sequester implementation as well as what to expect of the FY14 Appropriation process. Find out how agencies plan to spend and what your company should be doing about it. Attendees will learn successful marketing tools to help navigate the current state of the market.
Featured Speakers
Bill Gormley, President, The Gormley Group
Cameron Leuthy, Analyst, Bloomberg Federal
Roger Waldron, President, The Coalition for Government Procurement
Who Should Attend
Government Contractors and Prospective Contractors – Business Development, Marketing Managers, Contract Managers and Administrators
Government – Assisted Services Providers, contracting official and program managers
* Registrants will receive dial-in information two days prior to the event
DHS Spending Bill Passes House
Last week, the House of Representatives passed the homeland security spending bill for fiscal year 2014 (H.R. 2217). According to The Hill, the bill was approved in a 245-182 vote and would provide $38.9 billion in discretionary funding to the Department of Homeland Security (DHS).
Final Rule: Buy Indian Act Procedures
Effective July 8, 2013, the Department of the Interior (DOI) has issued a final rule revising the regulations and guiding implementation of the Buy Indian Act. Under the act, Indian Affairs is allowed to set-aside contract for Indian owned and controlled business. The goal of the decision is to encourage and promote procurement among the Indian Economic Enterprises. Specifically, the rule reduces the percentage of Indian ownership of business enterprises from a mandatory 100 percent to minimum 51 percent. It also allows Indian firms to participate in the DoD Mentor-Protégé Program without losing their eligibility for contracts under the Buy Indian Act. The rule is published at www.federalregister.gov/articles/2013/06/07/2013-13255/acquisition-regulations-buy-indian-act-procedures-for-contracting.