1 1 December 4-5, 2006 Sheraton Premiere at Tysons Corner Vienna, VA.
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Transcript of 1 1 December 4-5, 2006 Sheraton Premiere at Tysons Corner Vienna, VA.
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11December 4-5, 2006Sheraton Premiere at Tysons CornerVienna, VA
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Breakout Session # 707
Professor Steven L. Schooner Daniel S. GreenspahnThe George Washington University Law SchoolApril 15, 2008
4:30 Session
Too Dependent on Contractors?W. Gregor Macfarlan Excellence in Contract ManagementResearch and Writing Program:
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Outsourcing: The Current Reality
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DHS: A Portrait of Outsourcing
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Tax Day: Competing Views
“I pay my tax bills
more readily than
others for… I get
civilized society for it.”-Oliver Wendell Holmes
vs.
Optimistic Pessimistic
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Tax Day: Competing Critiques
vs.
Nations maximize wealth through free markets and limited taxes
-Adam Smith
The IRS has no legal
authority to collect taxes -Wesley Snipes
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Tax Reality: Where Your Money Goes
• Adam Smith: a profit motive fosters innovation and efficiency better than a public service ethic
• U.S. Spending: nearly 50% of the federal discretionary budget goes to government contracts
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Outsourcing and Privatization: Bipartisan Trend
“The era of big government is over.”
“Too much government crowds out…the private economy.”
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$100
$150
$200
$250
$300
$350
$400
$450
2000 2001 2002 2003 2004 2005 2006 2007
Federal Procurement Spending Since 2000 (in Billions)
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Cumulative Growth in Federal Procurement Dramatically Outpaces Inflation
0%
20%
40%
60%
80%
100%
2001 2002 2003 2004 2005 2006
Federal Procurement Consumer Price Index
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Outsourcing and Privatization: Growth Areas
• Tax Collection
• Health Care
• Education
• Welfare
• Prisons
• Info Technology
• Disaster Relief
• Police
• Border Security
• Port Security
• Foreign Operations
• Military Operations
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Debate on Privatizing Our MilitaryGoes Mainstream
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Battlefield Contracting:An “Unprecedented” Industry?
• 180,000 contractors in Iraq
• 1:1 ratio - contractors to troops
• Multi-billion dollar industry
• 25% of allied fatalities in 2007
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4,507 “Total” Fatalities:What About the 1,120 Contractors?
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Big Picture:Procurement Pressure
• Statutory Cuts: 1989-2000 workforce reductions
• Post-9/11: huge procurement spending growth
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Defense Acquisition Workforce and Procurement Trends
100
200
300
400
500
1990 1999 2004 2006Acquisition Workforce (in hundred thousands of employees)
DoD Procurement (in billions of dollars)
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Hollow Procurement and Contract Management Shops• DHS has “no in-house ability to
evaluate the solutions its contractors propose”
• “In Iraq, contract management . . . was a ‘pick up game’ ”
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30%
35%
40%
45%
50%
55%
60%
2000 2001 2002 2003 2004 2005 2006 2007
Federal Procurement Dollars Awarded Through Limited-Competition Since 2000
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Tying It Together
• Taxes: tax evasion flourishes because of an under-funded enforcement agency
• Procurement: purchasing regime is more prone to error, fraud, waste, and abuse with hollowed-out and under-funded agencies
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Is the Government “Too Dependent” Upon Contractors?
• That’s Irrelevant– Too many mandates, too few government employees– Pressure to suppress government headcount– Outsourced governance (and the blended workforce) is
the reality, and here to stay….
• The better question, therefore, is:
Can the Government responsibly manage its “outsourced workforce”?
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Outsourcing Makes Sense• Maintain focus on mission - specialization
• Surge capacity
• Flexibility
• Innovation, access to technical expertise
• Continue to meet agency missions with inadequate personnel, abilities, and resources
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Outsourcing is “Attractive”to Program Managers
• No troop/personnel caps
• Customer Service “ethic”
• Civil Service frustration
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Penny-Wise, Pound Foolish?
• Marginal cost saving (in a vacuum) is not the only metric
• Best value – Paying more for:– Higher quality goods/services– Quicker delivery/response time– Unlimited surge capacity– Flexibility – changing personnel, products,
approaches
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Outsourcing Has Limits• Inherently Government Functions
– Right idea– Poor decision-making rubric
• Blended Workforce evolved more quickly than:– Best management practices– Ethics rules (e.g., organizational conflicts)
• Contractors Need to Be Managed
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Gansler Commission: A Plea For Responsible Outsourcing?
Contract management is the essential post-award contracting function to ensure mission accomplishment, and it is an important control over fraud, waste, and abuse;... With not enough ACOs, PCOs could do this - but they are too busy and therefore it is not being done
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Investing in theAcquisition Workforce
• Total Headcount–New Hires–Pending Losses
• Training and Experience–New Hires–Existing Workforce
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Acquisition WorkforceWorst-Case Scenario???
• Denial remains prevalent • Retirement bubble ready to burst (but, a
recession may help)• Insufficient:
– leadership for massive hiring/training initiative;– numbers of qualified individuals interested in working for
the government (but, a recession may help);– time/resources for the existing workforce to gain
sufficient training/experience
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Restoring the Acquisition Workforce?
For the foreseeable future, Congress cannot spend “too much” on:
• Salary• performance
incentives• recruitment bonuses• retention bonuses
• intern programs,• workforce training• sabbaticals (for
higher education)
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Gansler Commission: A Plea For Responsible Outsourcing?
• Increase– Army military and civilian contracting personnel
[1,400+, approximately] 25 percent of the total– DOD post-award contract management personnel (to
fill DCMA billets for Army support) [nearly 600]
• Extrapolate across Government [8,000-10,000?]– Army ~ 15-25 percent of federal procurement $– Army historically better staffed than other agencies
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Scope of the Challenge: Recruiting the Future Acquisition Workforce:• Back-of-the-napkin assumption:
– 8,000-10,000 professional needed
• An Analogy: US Department of Justice< 8,200 Attorneys, including:
–General Legal Activities (all)–U.S. Attorneys (all 50 States)–Antitrust Division–Trustees
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Current Acquisition Workforce
Wrong Skill Set?1984 (CICA-FAR Era)• Supply• Formal
Advertised/Sealed Bid• Firm Fixed Price• Government-specific
specification• Awarded by PCO• Managed by DCAS
(DCMC, DCMA)
Today• Services
– Employee augmentation– Personal Services
• ID/IQ, Inter-agency vehicle• Cost-Reimbursement, T&M• Limited Competition• Unclear responsibility for post-
award contract management
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Current Acquisition WorkforceOpportunities, Attractions?
• Civil Service (for better or for worse)• Career ladder out of secretarial pool• Long-term, stable, safe career• Fixed retirement program• Inadequate incentive structure
– 1990’s – failed incentive initiative
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Recruiting the FutureAcquisition Workforce
• Gen X, Gen Y….– “most praised generation”– Universities and Helicopter Parenting– Show me the money!
• Civil Service Bureaucracy– Impenetrable, Slow, not user friendly
• Job Mobility• 401(k), TSP (What, me worry?)
• What is, why work in “procurement”?
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Compare to private sector….
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…. Business Acquisition Contracts & Pricing Manager responsible to provide contracting expertise to develop and negotiate creative business solutions …[P]osition … requires leading and managing … Create a culture of continuous improvement by communicating/deploying enterprise best practices and employee engagement. … Coach, mentor, manage, motivate and provide developmental opportunities … Seek and expand on original ideas, enhance others' ideas, and contribute own ideas. Understand the business issues related to the operation…
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Acquisition Reform Chorus?
“constant drumbeat claiming that federal agency [IG’s] are discouraging the acquisition workforce from performing their work in an optimum fashion.”
Nash, Dateline, 21 N&CR (May 2007)
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Can NCMA Play a Leadership Role?
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Good Luck!
• Questions?
• Comments?
• Suggestions?
• Ideas?