Government contracting is as old as government itself. For most of its history, federal contracting was the proverbial 800-pound gorilla, where the golden rule was "He who has the gold, rules." Of course as budgets and the role of government (particularly federal) in affecting business or commerce declines, the impact of government acquisition needs and initiatives on the larger economy has declined as well. All contracting professionals are taught the importance of a healthy "industrial base," which tends to be defined as a healthy and competitive group of prime contractors to meet present and future needs. It has historically been used as the rationale for avoiding overly burdensome or onerous acquisition regulations, lest contractors decide to move out of the business and no longer be a supplier.
While government drove research and technology, reduced budgets have accomplished what real or perceived excessive regulation did not—reducing the number of contractors competing for government business. Company mergers and acquisitions, driven by reduced or diversified markets, have reduced the number of firms available to compete for requirements. Government is often a follower rather than a leader in new technologies. One aspect of this well-understood change is a growing understanding and respect for informed and proficient supply chain management for mission success. Regarding government subcontracting, the one rule most contract managers understood was that this is an area where the customer (government) has no "privity" (relationship). The government awards to the prime and the prime manages the sub—end of story!
However, it is no longer nearly as simple as that (if it ever was). In recognition of the fact that requirements have become more complex, no prime contractor can be expected to inherently and organically maintain all product and service expertise in-house. Meanwhile, the government's growing need to ensure solid "bang for the buck" results in increased government involvement in ensuring proper subcontract and thus supply chain management. Program and contract manager oversight, DCMA Contractor Purchasing System Reviews and Defense Contract Audit Agency financial audits have become more rigorous and important.
In addition, the government is learning more about and gaining increased appreciation for judicious supply chain management. We are no longer in the American-dominated business world of 20, 30, or even five years ago. All products, services, labor markets, transportation, and logistics are interconnected today as never before. The smartphones many of us now sleep with, the cars we drive, the furniture we sit in, and the food we eat represent a vast web of interrelated events not ultimately determined, controlled, or defined by the USD(AT&L), the OFFP, or the FAR Council. We now live (like it or not) in a global village, where events on one side of the globe can have immediate ramifications for those elsewhere.
The impacts on contracting today are immediate and permanent. The federal government's initiatives in shared services, strategic sourcing, cyber security, category management, growing use of Capability Maturity Model Integration–certified GWAC programs, and my association's growing educational offerings in supply chain and subcontracting are clear recognition of these trends. Subcontract and supply chain management isn't a Contract Management Body of Knowledge (CMBOK)™ competency only relevant to prime and subcontractor buyers or procurement staff. Indeed all contracting (as well as program or even business) professionals should understand these principles, since that is where our world has quickly headed. Ask chief procurement officers at Apple or Toys "R" Us what can happen if you don't closely manage your supply chain.
It's time for government contracting managers to better appreciate and understand economic, program, supply chain, and subcontracting principles and practices beyond anything that need be documented in the FAR or state and local procurement code. That knowledge will result in the reduced costs and effective acquisition practices demanded by today's taxpayer customers.
Michael P. Fischetti is the Executive Director of the National Contract Management Association. His earlier federal career includes time at the Defense and Energy departments, and the General Services Administration.
