Federal Contract Law: Is procurement too reformed? Debates get sharp

Joseph J. Petrillo

Procurement policy is a matter of balance. Governments seek to achieve many goals when they enter into contracts: competition, efficiency, transparency, user satisfaction, accountability and wealth redistribution, to name some. The list goes on and on.

The trouble is, these goals can conflict with one another. Efficiency may be wonderful, but the most efficient form of procurement is sole-source contracting. And buying from a single source negates competition and denies the government its benefits, such as lower prices and better value.

Like any other form of engineering, procurement policy is a matter of trade-offs. Overemphasis on one value means stinting on others. The best system, overall, is one that finds a balance among multiple contending goals.

The proposed legislation to set up the new Department of Homeland Security strikes the right balance between the need to develop new responses to terrorism quickly and the traditional goals of government procurement.

For research, development and prototypes, the new department will have the extraordinary power to use 'other transactions,' which are exempt from most features of procurement law.

And the department gets another exemption from legal requirements that might impair its security mission. But for its day-to-day contracting, the Department of Homeland Security would have to follow the same laws and regulations currently applicable to its constituent parts.

The usual procurement system is robust enough to meet the usual needs of Homeland Security. The proposed legislation charts an intelligent course between the extremes of 'anything goes' in the name of security and refusing to grant the same flexibility enjoyed by the CIA and Department of Defense.

Keeping the right balance over time will be easier said than done. In a recent article in the Public Procurement Law Review, Prof. Joshua I. Schwartz of the George Washington University Law School wrote that a procurement system will always be 'a work in progress, rather than a finished product.' In addition to the inevitable compromises between conflicting goals, Schwartz points to 'a cyclical pattern of overreaction and correction.'

The defense contracting scandals of the 1980s led to tighter regulations, and the expansion of criminal and civil penalties. This overreaction eventually sparked the reforms of the 1990s, which loosened regulations in many areas of contracting.

A respectable school of thought says the reforms of the '90s may have gone too far. Another GWU law prof, Steven Schooner, argues that these changes gutted oversight mechanisms and transparency. His American University Procurement Review article, 'Fear of Oversight,' is a thought-provoking analysis.

Angela Styles, administrator of the Office of Federal Procurement Policy, has some sympathy for this view. Her more-cautious approach to procurement reform is an effort to redress some of the excesses of the reform movement. For this, she has drawn unusually sharp criticism, from sources both overt and anonymous. Change in the balance of opposing values can create winners and losers.

In procurement, we are all pilgrims searching for the right balance among opposing goals and values. Reasonable folks can differ about the correct balance, but they should do so with dignity, intellectual honesty and mutual respect.

Joseph J. Petrillo is a lawyer with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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