Are there too many contracts?

RICHMOND, Va.--The proliferation of government systems contracts has the potential to
dilute competition, said federal and industry officials at the Industry Advisory Council's
recent Executive Leadership Conference here.

Vendors and federal employees alike generally praised procurement reform, but they said
that the multitude of contract options will have the unintended consequence of reducing
competition and increasing prices as companies decide not to vie for federal dollars.

Even so, conference speakers said procurement changes brought about by the Federal
Acquisition Streamlining Act, the Federal Acquisition Re-form Act and the Information
Technology Management Reform Act have improved relations between agencies and vendors.

"Clinger-Cohen installs in legislation what we've been trying to do all
along," said Rona Stillman, the General Accounting Office's chief scientist, of the
less micromanaged buying process that ITMRA has allowed agencies to create.

But the overabundance of IT contracts is an unanticipated side effect, she said.

Vendors agreed. "We're reaching a point where we can't afford to compete,"
said Ed Gassman, director of contracts for Hewlett-Packard Co. "The money available
hasn't gone up, but the number of contracts has skyrocketed."

Robert Dornan, senior vice president for Federal Sources Inc. of McLean, Va., said that
the numbers don't add up. The government will spend about $30 billion on IT in 1998. But
right now agencies have awarded contracts that have a total publicized value of $66
billion, Dornan said.

Contrary to perception, the cost of selling to the government has gone up, not down, as
companies have beefed up their sales and marketing teams, Dornan said. And though most
vendors and agencies agree that government buyers are getting a good deal, the
proliferation of contracts could have a reverse impact if companies decide that profits
are too low compared to costs.

"It's real. It's a problem, and we need to address it," Dornan said.

With the expansion of General Services Administration schedule sales, government-wide
acquisition contracts and blanket purchasing agreements, contracts pit agencies against
one another, said John Howard, president and chief executive officer WordPro Inc. of
Rockville, Md.

"It's absolutely out of control," he said.

Contracting offices, working to justify their existence, put out evermore contracts, he
said, forcing vendors--especially small businesses--to spread their resources thinly. But
"has anybody seen a contracting office close? Have we reduced the cost to government?
No," Howard said.

Energy Department chief information officer S.W. "Woody" Hall Jr. said
flooding the government market with too many contracts is a potential problem. "I
don't think we're there yet," he said. "If there were too many of them, people
would quit bidding," he said, drawing groans from many vendors in the audience.

"It's not just whining," said Steven Kelman, former administrator of the
Office of Federal Procurement Policy. The rapid growth of GWACs has created a legitimate
problem, he said. Government also needs to be wary that it does not give vendors
preferential treatment, Kelman said.

"We have to be careful that we don't signal to the community out there that we
have one company in mind and we don't want others to compete," he said. That is an
issue sure to raise Congress' ire, Kelman said.

Past performance issues drew lots of comments at the conference.

David Muzio, deputy associate administrator of the Office of Management and Budget,
said more agencies are starting to use a formal, five-point rating practice.

But Mark A. Boster, the Justice Department's deputy CIO, said that although Justice
uses past performance criteria to evaluate vendors, he opposes a formalized,
government-wide system.

"I don't want to see another bureaucratic system put in place," he said. That
would focus more time and effort on the rating than on getting the job done. "I want
to put energy into getting good products," he said.

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