Wednesday, October 22nd, 2014

The Obameter

Set standards for when the government should hire defense contractors


"Require the Pentagon to develop a strategy for figuring out when contracting makes sense and when it doesn't, rather than continually handing off governmental jobs to well-connected companies."


Updates

Standards are there, but not always applied

President Barack Obama took office at a time when popular suspicion of military contractors ran high. Private firms were clearing millions of dollars in profits in Iraq and Afghanistan with no guarantee that the promised work was even done. Less than two months after the inauguration, Obama signed an executive order, directing the Office of Management and Budget to issue guidelines to fundamentally change how the Defense Department would use contractors from that time onward.

The Office of Management and Budget, or OMB, followed up in October, setting out goals and guidelines for federal procurement officials. The memo pressed government officials to avoid the sort of contracts involved in the worst abuses -- the ones with  no competitive bidding or the government was obligated to reimburse whatever costs the contractor submitted.

The Office of Federal Procurement Policy amplified the OMB directive with a policy letter that said every government agency, and especially the Defense and State departments, should ensure that work that is "inherently governmental” be done in-house.

The Defense Department had its own directives. Defense Secretary Robert Gates built contractor cutbacks into the 2010 budget request. The Pentagon's head of Acquisition, Technology and Logistics told all departments to rein in contracting and beef up contract overseers. The order of the day was to "do more without more,” with the goal of saving $100 billion over five years.

The Pentagon packaged its new approach into an internal web site, "Better Buying Power” with a logo of a fist clutching dollar bills. In March 2011, then-Secretary of Defense Gates announced the department would hire 10,000 new acquisition specialists by 2015.

At the same time, the bipartisan Commission on Wartime Contracting, created in 2008, examined how the military and other agencies used contractors in Iraq and Afghanistan. Its 2011 final report offered a bleak assessment of the past and a warning about the future. The commission estimated that between $30 billion and $60 billion had been lost to waste and fraud.

One of the main recommendations was to increase the number of government workers to oversee contracting.

Some changes

Despite the push from the president and senior officials, the consensus is that reform has been stronger on paper than in practice. Charles Tiefer, a veteran of military contracting oversight who now teaches at the University of Baltimore School of Law, was a member of the Commission on Wartime Contracting.

"I give Obama an ‘A' for effort,” Tiefer said. "He made this a priority early on, and I believe it was sincere. But everything was watered down by the bureaucracy who resisted change and the contractors and their lobbyists who wanted to keep their profits.”

Scott Amey, general counsel for the Project on Government Oversight -- a nonprofit group funded by Ford, Pew and other large foundations that investigates waste and abuse in the government -- pointed to limited successes.

Amey said the Pentagon moves to in-source more activities were a step in the right direction, but then they stopped.

"The Defense Department has backed off an initiative to rebalance its workforce and reduce its reliance on contractors,” Amey said. "Part of that is due to hiring ceilings. Congress hasn't played nice in restricting the executive branch's ability to bring on new employees.”

Amey also says Pentagon officials either lack the analytic tools or don't use the ones they have to make valid cost comparisons between doing work in-house or contracting it out.

"What we want to see is a genuine strategy that reflects all the costs,” Amey said. "A lot of people have bought into the myth that contractors are cheaper and that's often just not the case.”

The government contractors themselves say it's too early to tell what the Pentagon will do.

The Professional Services Council bills itself as the "voice of the government services industry” and is a leading trade group for contractors. Executive vice president Alan Chvotkin said he sees changes in the government's approach.

"There's clearly been some activity at the Defense Department,” Chvotikin said. "But they have more to go. Some of it is just cycle time. Once you have a new way of doing things, you apply it to the new work coming along , not the contracts you already have, so it takes a while.”

Our ruling

Obama promised to have the Pentagon develop a strategy to decide when it needed to use contractors and when it could do without. As far as crafting a strategy, that promise has been kept. Facts on the ground suggest that the strategy has been applied unevenly. We rate this promise as a Compromise.

Sources:

Interview with Alan Chvotkin, Executive vice president, Professional Services Council, November 6, 2012

Interview with Charles Tiefer, Professor of Law, University of Baltimore Law School, November 6, 2012

Interview with Scott Amey, General counsel, Project on Government Oversight, November 5, 2012

Secretary of Defense, Continuation of Defense acquisition workforce improvement initiative, March 15, 2011

Commission on Wartime Contracting, Final Report, August 31, 2011

Office of Federal Procurement Policy, Letter: Performance of inherently governmental and critical functions, September 12, 2011

Department of Defense, Office of Acquisition Technology and Logistics, Memo: Better buying power, September 14, 2010

Department of Defense, Better Buying Power

Department of Defense, Office of Inspector General, Contingency Contracting: A framework for reform, 2012 update, September 18, 2012

Forbes, Pentagon insourcing binge begins to unravel, March 7, 2011

Washington Post, Insourcing effort still under fire despite Pentagon"s gradual retreat from the plan, May 29, 2011

Obama directs OMB to begin contract reform

President Obama signed an executive order on March 4, 2009, calling for an examination of federal contracts.

Obama said the amount of money going to contracts over the previous eight years had doubled, to more than $500 billion.

"In Iraq, too much money has been paid out for services that were never performed, buildings that were never completed, companies that skimmed off the top," Obama said at a event announcing the order. "At home, too many contractors have been allowed to get away with delay after delay after delay in developing unproven weapon systems. It's time for this waste and inefficiency to end."

The executive order directs Peter Orszag, head of the Office of Management and Budget, to lead a review of federal contracting procedures. By Sept. 30, Obama wants government agencies to have new guidelines for managing contracts to promote competition, as well as guidance on when contract work should be undertaken in the first place.

"The days of giving defense contractors a blank check are over," Obama said. He also said he expected to find about $40 billion in savings.

Ordering up guidelines is a far cry from actually cutting contracts. But the executive order is concrete action toward that goal. We rule this promise In the Works.

Sources:

White House Web site, Memorandum on government contracting , March 4, 2009

White House Web site, Remarks by the President on procurement, March 4, 2009