Execs: Take the long view on acquisitions

Execs: Take the long view on acquisitions

BY KEVIN MCCANEY | GCN STAFF

Agencies looking to get the most out of their procurement systems need to look beyond any given procurement to the end result and develop a coordinated, detailed plan for getting there.

That was the message from a group of government acquisition executives at a recent conference in Washington, on the subject of using capital planning in procurement.

'Capital planning'to me, it's planning, period,' said Deidre A. Lee, director of Defense procurement.

Government purchasing vehicles such as those from the General Services Administration grease the wheels but don't provide steering. 'The GSA schedule does not negate the need for planning,' Lee said. 'Like I say, we can now buy the wrong thing faster.'

Diedre Lee
'Capital planning'to me, it's planning, period,' says DOD procurement director Deidre Lee.
Planning is necessary to circumvent the technical and cultural stovepipes that can interfere with the success of a project, she said.

Glenn G. Perry, director of contracts and purchasing operations for the Education Department, said acquisitions have to be part of a strategy that includes all the departments or offices involved. 'All parties have to support program management,' he said.

'We can no longer survive if someone has a bright idea, and then hands it off to somebody else to do,' Perry said.

Education is making efforts to coordinate management of its programs, he said, citing models of good strategic planning within the Defense Department.

'DOD tends to have more discipline,' Perry said. 'The civilian agencies sometimes start with a good idea, then realize they need X and then realize they need Y. Then we sometimes wind up backing into things.'

Along with planning, an important piece of the strategic puzzle is effective use of incentives, said Kenneth J. Oscar, deputy assistant secretary of the Army for procurement.

Agencies 'don't think enough about incentives,' Oscar said. 'Incentives help develop the behavior of the contractor.'

For example, he said, 'If the incentive is to sell parts, they'll sell parts,' and make money by selling more of them. But if the incentive is to keep a project supplied with working parts, they'll likely make the parts last longer, requiring fewer replacements.

Pay at milestones

The idea is to use performance incentives to promote efficient service and to contain costs. 'When I was in industry, I got my bonus for overrunning contracts,' he said.

Oscar said structuring contracts to make payments at milestones such as completion of a phase, rather than making regular payments, is a strong incentive.

He also recommended not tying price to quantity. Volume discounts might look like bargains but they also create an incentive for a company to sell a higher number of possibly inferior products. Decoupling price from quantity does more to ensure quality while allowing a company to make money on the products sold. 'It's win-win,' he said.

Oscar said share-in-savings programs are 'a great concept' and said agencies also can look to share assets. For example, he said, the Postal Service paid nothing to contract out its change-of-address forms and services because the company doing the work puts its advertisements on the back of the forms.

Performance-based contracts that emphasize results more than product specifications go a long way toward putting the right incentives in place, he said. 'We tend to over-prescribe in contracts,' he said.

'We do it every day with PCs,' Perry agreed, by specifying clock speeds and other features. It would be better to just list performance results and let the contractor worry about how to meet them, he said.

The changing landscape of government procurement also underscores the need for planning, Lee said. 'We're now spending more than half our money on services. We've significantly changed the way we buy things.'

But agencies need to ask an essential question, Lee said, and 'we in government have not been good at that question: Do we really need this?'

She gave as an example Web sites that duplicate information.

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