Fee-for-service and open bids just do the mix
As a case study, ICE-MAN should be carefully examined to ensure its lessons are fully
absorbed and its mistakes not repeated.
Encouraging fee-for-service contracts between data centers and client agencies was, and
still is, a sound idea. It made sense to suggest that existing government data centers
treat their government clients like, well, clients.
Requiring government data centers to amortize their costs and charge their government
customers for their work makes all the sense in the world.
But this focus inevitably has led to the search for additional government customers.
The second policy stream also sounds sensible-that the public sector can be permitted
(and sometimes tacitly encouraged) to compete against the public sector under certain
circumstances, as long as there are carefully thought-out rules.
Which brings us to the most recent collision. It is clear that the Agriculture
Department center, which was awarded the work, is a very capable institution. It may well
be as efficient and capable as its private sector counterparts. But we will never know,
because the private and public sectors are so fundamentally different.
Private sector bidders for information technology procurements start on a somewhat
level playing field with one another. Each must meet payroll and administrative costs and
make a profit. If a proposal calls for investment in service or technology costs, vendors
must account for those costs.
Yet creating a level playing field between private sector bidders and government
agencies is a difficult if not impossible task.
Agencies risk little or nothing when they bid for a project. If they lose a proposal
against industry, no one loses their job. In industry, people do.
Taxpayers pay to recruit government workers and taxpayers pay their salaries. Taxpayers
also pay for the government building, the computers, copy machines, telephone switches and
all the other equipment. The competing agency is only bidding the marginal increases in
costs of performance.
It is hard to see how an agency could ever lose under such circumstances. And even if
it bid and lost its proverbial shirt, Uncle Sam or some revolving fund will be waiting to
pay the loss-again without accountability.
There is no way on Earth that the competitive advantage afforded by the publicly
supported costs of an agency can be accurately accounted for under any commonly accepted
accounting principles. Therefore, there can be no fair way for the private sector and
government agencies to compete for the same work.
The one policy prescription for avoiding such a mess is equally clear, if potentially
unpalatable to some in government. The government should never again run a procurement
where the private sector is forced to compete against a government entity, as was the case
in the FAA competition. Such a rule would remove the need to establish policy through
litigation-a costly, cumbersome, unwieldy and uncertain manner of policy development.
Existing government guidance obviously is insufficient.
Yet unless such a bright-line rule is established there will remain the possibility of
absurd and inappropriate results.
This is a classic case where a federal advisory committee made up of stakeholders could
meet, hear testimony and recommend policy in 90 days. Stakeholders could be employee
unions, information technology companies with a long view of public policy and feds
involved with marketing government services.
The actions by the FAA in making the award should trigger the Office of Federal
Procurement Policy and Congress to settle this issue clearly and forthrightly, once and
There's a risk that Congress could step in with draconian legislative fixes if the
regulatory apparatus cannot quickly establish a viable framework. This award already has
breathed new life into Sen. Fred Thomas' (R-Wyo.) bill, S 314, and its House counterpart,
HR 716, whose chief sponsor is Rep. John J. Duncan Jr. (R-Tenn.).
Perhaps it's time to take an across-the-board look at the competition between the
government and the private sector and create a new understanding.
Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan.
He has long experience in federal information technology issues. E-mail him at email@example.com.