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Why the government can't buy more like a business

Mar. 27, 2014 - 06:00AM   |  
By MICHAEL FISCHETTI   |   Comments
Fischetti
Fischetti ()

Commonly heard issues with federal government contracting (such as, “it takes too long,” “it’s too expensive,” “it’s overly bureaucratic,” or “it’s too burdensome”) often conclude with a determination that the government should adopt commercial acquisition practices.

Government contracting does have considerable regulation associated with it. The government version of “commercial contracting,” found in the Federal Acquisition Regulation Part 12, was an attempt to address this idea and has been somewhat successful. However, additional government-unique requirements have been added over time.

In many cases, a primary hurdle is that a customer can have unique requirements, making that customer the only customer.

However, the biggest hurdle to be addressed in adopting commercial practices involves the government’s principle of fairness. Government contracting involves taxpayer funds. They belong to everybody and thus everyone gets a say in how they’re spent. Dollars are authorized and appropriated to a specific government agency through a law passed by a majority vote of elected representatives (Congress). Those representatives have also enacted a multitude of other laws over the years, implemented through acquisition regulations using a rulemaking statute. Everyone is involved in how they’re written. Everyone demands the spending of taxpayer dollars by contract to be fair. Thus, in most cases, the government competes its needs or must have a pretty good reason not to (called “exceptions”). Congress passed a law to drive this point home (the Competition in Contracting Act).

Being fair also requires consideration of socioeconomic interests (e.g., promoting small business, the environment, American-made products, performance in areas with high unemployment, etc.). Also, contracts (other than in exceptional circumstances) can’t be for a long term, so they’re generally short in duration. Finally, the government doesn’t tolerate cheating on its contracts. If you cheat on a commercial contract, civil financial penalties may result. With government contracts, on the other hand, fraud can lead to criminal penalties, such as those associated with violations of the False Claims Act, False Statements Act, or Anti-Kickback Act.

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Another hurdle is our appropriation process. Government contracting offers the unique feature of the “termination for convenience” clause, rarely seen in commercial contracting. Under a termination for convenience, the government can end a contract for any reason, or no reason at all! This is a handy tool when you never know from one year to the next (or even one month to the next) if Congress is going to renew your agency’s appropriation or you receive less than you planned and something has to give. Similarly, the “changes” clause in government contracting is virtually unheard-of in commercial contracts, giving the government unilateral rights to change its mind at any time.

The Contract Management Body of Knowledge, a professional standard, recognizes similar “competencies” between government and commercial contracting, such as best value or negotiations, meaning the skills required to perform both government and commercial contracting are the same. However, the external influences mentioned here separate government from commercial contracting.

Improving the pace and outcomes of government contracting involves streamlining unnecessary management, financial and program processes, policies and regulations; hiring top-quality acquisition managers and empowering them to perform; and creating an overall organizational culture of high-level performance. However, buying commercial is not the complete solution.

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