This week the Office of Management & Budget (OMB) issued more guidance related to reform of government procurement processes. The OMB memo provides further meat to goals for reducing acquisition costs set out by President Obama earlier in the year.
For 2010, federal agencies must reduce by at least 10 percent the share of dollars obligated through new contracts that are awarded non-competitively (or receive only one bid), or are based on cost-reimbursement or time and materials. The new memo provides guidelines for procurement managers to use for evaluating the competitiveness of their agency’s purchasing practices.
The memo points to the need for purchasing officers to answer three key questions:
(1) How is the agency maximizing the effective use of competition and choosing the best contract type for the acquisition?
(2) How is the agency mitigating risk when non-competitive, cost-reimbursement, or T&M contracts are used?
(3) How is the agency creating opportunities to transition to more competitive and lower risk contracts?
Recommendations provided surrounding these questions are varied, but highlights include concepts such as:
Better planning. To promote competition effectively, agencies must provide sufficient information in the statement of work and sufficient time for response. They must understand how the industry works (distribution channels, etc) and what drives costs.
Focus on results. Agencies should focus on outcomes, rather than detailing how work is to be performed . This will allow vendors to offer more innovative solutions and open possibilities for off-the-shelf solutions.
Use the appropriate contract types. Agencies should scrutinize projects and only use cost-reimbursement or T&M contracts under specific conditions.
Limit contract terms and regularly assess contractor performance. Shorter terms and scrutinized vendors will drive better performance and lower costs.
Engage the market. Actively pursue the market’s ideas on ways to reduce costs and structure contracts.
These are good suggestions overall, with positive impact on competitiveness–at least in theory. Contractors should continue to focus on value-creation and service quality, realizing long-term, non-competitive contracts could dry up. Doing so will ensure companies don’t get lazy in their offerings and taxpayers receive a good return on their investments.