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A long view on innovating for acquisition reform

May. 6, 2014 - 03:51PM   |  
By DAN CHENOK   |   Comments
Dan Chenok is the executive director of the IBM Center for The Business of Government. He has held multiple government positions, including service as OMB's SES Executive in charge of IT policy and budgeting. / File

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Reforming the acquisition system in government is not a simple proposition. That said, a shared vision of the future, and examples for how to ignite that vision, can help move government forward to achieve better outcomes for agencies and citizens alike.

The federal government achieves a significant part of its mission by working with and through organizations outside agency walls, primarily through grants, contracts, and similar agreements. The work of government contracting is a very large piece of this pie – whether for information technology, physical goods, or other professional services, nearly half of all federal discretionary spending falls into the acquisition category.

Significant attention has focused on issues that affect near-term needs, gaps, and opportunities in the acquisition process. Addressing today’s critical concerns is of course necessary in order to ensure that agencies derive the most value from their contract activities. Often, value is measured by the optimal mix of quality, speed and cost while maintaining program integrity and legal/policy compliance. Too often the discussion – whether among acquisition professionals, IT and program executives, or oversight bodies – stops at the point of fixing today’s problems. As a result, strategic discussions about how to improve acquisition over the longer term are few and far between. In addition, the stakeholder community, a key member in this conversation, lacks a model in which positive steps forward can be placed as part of a broader transformation toward a long-term vision.

Interestingly, a group of government and industry executives have started to collaborate on an informal vision – a sketch of a future state for acquisition reform. Using the working title of “Acquisition of the Future,” this effort is attempting to develop a clear vision and framework for driving results, providing a context for the many leaders who are working to make things better. As the AOF site notes, “in an increasingly complex system and living in a fast and ever-changing world, the challenge can seem daunting. So many are taking on improvements that they hope will lead to something markedly different and better; but they stand alone and without a unifying view of or strong data showing how to actually achieve.”

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I have recently had the good fortune of joining the AOF effort, working with Kymm McCabe and others in support of government leaders to help create such a vision. Recently, the IBM Center for the Business of Government released the most recent edition of the IBM Center’s magazine, The Business of Government, highlighted several acquisition innovators who are taking on improvements that start down the road to this vision.

In the magazine, Managing Editor Michael Keegan writes about two leaders who are, in different ways, taking steps to enhance and improve acquisition across government: GSA’s Mary Davie and DOD’s Mark Harnitchek.

The Leaders

Mary Davie, assistant commissioner, U.S. General Services Administration’s Office of Integrated Technology Services (ITS), describes how ITS is increasing government IT’s value while lowering cost. She identifies her office’s strategic priorities and how she is improving its operations, becoming more efficient agile. Davie seeks a "winning formula for more effective IT spend/procurement," through better application of tools like strategic sourcing to benefit agencies.

Davie notes three challenges for ITS:

■Keeping up with the pace of technological innovation,

■Collaborating to understand how technology evolves, and

■Moving from being solely an acquisition organization, to ensure expertise in technology as well.

Davie’s approach to addressing these challenges is very much in line with key elements of a future vision for acquisition, citing three main strategic goals:

Deliver efficient operations, for example by looking to increase the amount of information available for agencies to make informed decisions, and making prices paid available for acquisition vehicles so agencies can conduct better research and better negotiate prices with vendors.

Deliver world-class value, providing agencies with tools to improve collective decisions and buying power in a world where federal purchasers are often fragmented and would benefit from sharing best practices. Davie also speaks of “speed to value,” – for example, cloud computing can save the government many millions, but agencies need ways to access innovative technologies like cloud quickly and efficiently

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Be agile and innovative, ahead of the market. Moving to as-a-service buying, like GSA’s recent infrastructure as a service and e-mail as a service blanket purchase agreements, help agencies to anticipate that future.

Vice Admiral Mark Harnitchek, director of the Defense Logistics Agency (DLA), is charged with providing full-spectrum logistical support to the armed services and civilians around the world every day and for every major conflict over the past five decades. Logistics, which in the private sector is where much procurement expertise lies, is cost driver for government that must be managed with deliberate precision. Admiral Harnitchek recognizes that the very nature of envisioned threats and conflicts over the next decade, combined with increased fiscal challenges, demand an agile, joint logistics response marked by innovation and best practices.

Harnitchek set his vision as a cost-savings over time, referred to as “13 in 6” ($13 billion in savings over six years). Included in this approach are very contemporary notions of reduced infrastructure footprint as well as effective use of reverse auctions. Like Davie, Harnitchek sets key priorities that support this vision of a better future: decrease direct material costs, decrease operating costs, right-size inventory, improve customer service, and achieve audit readiness. Interestingly, Harnitchek cites a commercial model as inspiration for government transformation:

We manage 26 distribution centers worldwide. To achieve our 13-in-6 vision, it is important to optimize warehouse operations and reduce distribution infrastructure. Since we need to decrease operating costs, we’re going to keep the inventory we need and store it in our most cost-effective, advantageously located distribution centers. Last year, 40 percent of DLA’s inventory was in more than one place. If you talk to FedEx, they’ll tell you they can have anything, big or small, moved anywhere in the United States in five days. How can we employ the same principle? It involves minimizing inventory and really leveraging our fabulous distribution and transportation system. We’re going to put most of our wholesale inventory at one of four places.

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Of course, transforming federal acquisition and the supply chain requires multiple steps over many years by many leaders. In the acquisition of the future discussions, we’ve referred to this as a “transformation model”, supported by a “map” showing where to go and a set of “paths” to get there. In an enterprise as complex as the $500 billion federal procurement system, transformation in large, multi-faceted programs often requires sophisticated contracting approaches. This notion is reinforced in another article appearing in “The Business of Government,” by two of the nation’s leading academic writers on acquisition, Trevor Brown of the John Glenn School of Public Affairs at The Ohio State University, and Professor David Van Slyke of the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Brown and Van Slyke studied large and complex contracts and systems to derive lessons learned for government seeking to improve a future acquisition state, including:

Lead systems integrators can benefit complex contracts. Government agencies use LSIs to do the work of acquiring and integrating system components in a “system of systems” purchase. The challenge in working with an LSI to procure a complex product is to find ways to facilitate cooperation where the contract’s terms do not fully define and incentivize the parameters of a win-win outcome. To support this, well-functioning integrated project teams (IPT), with clear distributions of decision authority and cost responsibility, can help avoid confusion about who is responsible for making decisions.

Successful procurements for complex contracts require user and producer input. Buyers and sellers of complex products need information. Two types of information are particularly critical in complex contracting: what will product users do with the product, and what steps do product manufacturers need to take to construct the product. One of the principal goals of an IPT is to bring together the two groups of people (users or buyers; makers or sellers) to produce this information.

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Complex contracts require internal contract management capacity. Just as successful procurements for complex products require the active participation of users and manufacturers, they also require enough highly trained contract professionals to fully manage the process. Contract managers have principal responsibility for translating what the buyer wants into contract terms to convey to the seller, and then ensuring the seller delivers. Contract management capacity stems in part from the contract managers’ experience and expertise—their knowledge of the product and the steps they can take within the boundaries framed by public laws like the Federal Acquisition Regulation. Capacity is also in part a result of the sheer number and continuity of contract managers on a particular procurement; building the acquisition workforce has to be a priority.

Going Forward

The process of developing a shared vision for the future across the acquisition community can be a powerful means of aligning key stakeholders around key goals and objectives. That said, agency and industry leaders can best move toward such goals by understanding and implementing the art of the possible, as shown by innovators and observers discussed above. This is an important dialogue, one well worth the time.

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