Writing from Avon, North Carolina this week. It truly is the last gasp of summer as we are on our family vacation to the Outer Banks. It is always good to get out of Washington DC and back into the real world. It actually reminds me of why I came to Washington in the first place—an abiding and passionate interest in public policy (good thing my kids are not looking over my shoulder as I write this, they would probably roll their eyes). It also reminds me of why procurement policy matters. The Federal procurement system touches literally every Government program and activity. Through the Federal procurement system, Government partners with contractors to deliver the products and services that help defend our Nation, maintain the Social Security program, operate our National Parks (we just got back from the Cape Hatteras Lighthouse), maintain food safety, conduct diplomacy, develop new energy sources, and support our veterans. And these are just a few of the governmental functions supported by our procurement system.
That’s why effective and efficient policies and procedures governing the acquisition of products and services can make a real difference in helping agencies meet their missions while better serving the taxpayer. There is another big positive to an efficient and effective procurement system—jobs. The commercial activity generated by the Federal procurement system means hundreds of thousands, if not millions, of jobs for Americans. Take the GSA schedules program, it accounts for approximately $40 billion dollars annually in government purchases from commercial firms. The VA schedules program accounts for approximately $10 billion in annual purchases. $50 billion in government purchases translates into a heck of a lot of jobs! An efficient and effective procurement system can mean a better return for the taxpayer as well as opportunity and jobs for the private sector.
Burdensome policies and procedures do make a difference. They divert resources away from real economic activity (making, buying and selling) and can distort the commercial marketplace. The nexus between the Price Reduction Clause (PRC) and the current FAR 8.4 ordering procedures are a real example of overly burdensome regulations that distort economic activity. The FAR 8.4 ordering procedures require competition for all orders exceeding $3,000. Pursuant to a Congressional mandate, FAR 8.4 now provides that for orders exceeding $150,000 the contracting officer must provide notice and an opportunity to compete to all schedule contractors capable of meeting the requirement (via e-Buy, GSA’s electronic quote system) or as many as practicable to reasonably ensure receipt of at least three offers. FAR 8.4 also requires contracting officers to seek price reductions for orders over $150,000.
With the changes in FAR 8.4 and the growth of e-Buy, the PRC is no longer relevant to pricing under the schedules program. But not only is the PRC irrelevant, it also distorts the commercial marketplace. Because the clause obligates a contractor to pass on to the Government price reductions offered to certain commercial customers, the clause essentially restricts a contractor’s ability to compete commercially. As such, the PRC is anti-competitive.
The irony here is that Government and industry continue to spend millions of dollars each year in compliance and oversight costs related to the PRC. This is money that could be invested by contractors to improve products, develop new commercial solutions, and invest in their workforce. At the same time, the Government could invest in the acquisition workforce and its online procurement tools rather maintaining an outdated oversight mechanism. These are investments that would grow the economy, improve the procurement system, and provide a great return for the taxpayer. That’s why an efficient and effective procurement system matters. That’s why we should all care.
I look forward to returning to Washington to continue promoting a procurement system that works for Government, industry and the taxpayer.
