All synonomous reform programs are not the same
Procurement reform in the 1990s has been a crazy quilt of programs, lacking consistency
and coherence. With each round of reform, buying was supposed to be simpler than before.
But because the recent procurement changes dont form a single, unitary program,
we can judge each one on its own merits. With the first data coming in, it may soon be
possible to decide which new reform programs are worth keeping and which are failed
Confusingly, there are at least three dissimilar programs all using the term
commercial. One is for buying commercial products, one for using the
commercial buying practices and one for outsourcing commercial-type activities.
Repeated use of this word is neither coincidental nor resulting from a lack of
Commercial invokes the many successful efforts to run government programs
on a more businesslike basis. But these three programs deserve separate consideration.
The most promising of the three is the shift from buying government-specific products
to buying commercial ones. Anecdotes abound about substantial savings from this program,
and there are sound economic reasons for expecting savings.
Government-unique specs can add cost by increasing the types and numbers of
requirements a supplier must meet. They limit competition by excluding commercial sources
not interested in retooling their products. And because suppliers to the commercial
marketplace are likely to have substantial volume, they may be more efficient.
Still, there are limits to the benefits of buying commercial products. Unique
requirements, such as military ones, can be worth the extra cost. Some industries, such as
those that produce house brands for large retail outlets, are geared for special
production runs for contract buyers. Meeting government specs is not necessarily onerous
for these guys.
The second reform has led to using commercial buying practices. In other words,
agencies alter or abandon the traditional sealed-bid proposal and negotiation process in
favor of more businesslike methods. This improves the process only to the extent that the
new practices are actually superior and that the commercial paradigm applies to government
purchasing in the first place.
No one has made a rigorous attempt to prove the merits of either proposition. The
initiative is pretty much supported by the faith of the participants.
One example of commercial buying is the use of IMPAC cards. The claimed savings accrue
from a reduced contracting staff andharder to measurea shorter buying cycle.
Unfortunately, the costs also are hard to gauge. The purchasing once done in bulk by
procurement personnel is being done in bits and pieces by many civil servants. Surely, the
time they spend shopping has some value, and there is an opportunity cost never accounted
for. Yet through the extensive use of credit cards, vast sums are flowing out in many
thousands of smaller purchases. The difficulty of managing the sheer volume of
transactions presents a new and unique opportunity for abuse. Buyers incur cost either
from extensive oversight or a tolerated degree of misuse.
At the root of the cost-benefit tradeoff is the question of whether a centralized
purchasing system pays for itself in reduced unit prices.
The assumption of the credit card initiative is that decentralized buying is always
better. No one seems to know which is right, however, and the proponents of the credit
card program dont even seem to care.
The last reform initiative to bear the title of commercial is actually nothing new.
This is the effort to outsource certain government activities when they can be done better
or cheaper by the private sector.
Much of what the government does is commercial in natureissuing paychecks, buying
supplies, conducting audits. These services are all available from vendors.
Contracting out has been a governmentwide initiative at least since 1955, the year the
Bureau of the Budget issued the precursor to todays Office of Management and Budget
Circular A-76. A-76 sets out an extensive methodology for deciding which functions are
appropriate for outsourcing and when.
That something this old can be presented as an innovation suggests that it has had
little impact. The obstacles to this program are considerable, which should be no surprise
when federal jobs are at stake.
So when you hear the word commercial used to describe procurement reform,
dont stop thinking. Theres commercial, and then theres commercial.
Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo &
Powell, PLLC. E-mail him at email@example.com.