A Broken Clock Is Correct Twice a Day

Many blog visitors love the cage match that features POGO versus the pro-contractor lobby.  Steve Kelman is sometimes in the middle of that ring.  I'm happy to report, however, that POGO mostly agrees with Kelman's stance that the government must do a better job getting lower prices.  In a recent Federal Computer Week column, Kelman argued that:

...agencies should be more aggressive in seeking discounts when they are taking time-and-materials bids on new task orders.  Companies list their labor rates on the General Services Administration's information technology services schedules, but smart contracting officers know that those are starting points for bargaining, not fixed prices.

We were also reminded of this concept as the GSA readies itself for an onslaught of stimulus spending.

Obtaining discounts, however, flies in the face of the findings of a contracting panel that is expected to recommend that the government terminate the requirement for contractors to offer the government certain discounts and price reductions.  That same panel is also considering recommending the removal of all prices from government service catalogs.

Leveraging buying power and obtaining lowest practicable prices have always been on POGO's list of contracting reforms.  But we only partially support Kelman's idea because obtaining lower prices won't, by itself, be the end-all solution that will save the government hundreds of millions of dollars.  Why?  Because the government is often at the mercy of contractors who claim that the job will require more money and more time than first agreed--especially in time and material contracts.  Unless the government moves to a system of lower prices and more fixed-price contracts, government savings might not be realized.

Moreover, the contractors are currently pushing to move away from any known and transparent pricing system.  With an acquisition workforce that is stretched thin, who will be in a position to pursue a complex sales negotiation without any pre-arranged hourly labor rates, contractor-supplied cost or pricing data (which is a disgrace made legal by the Services Acquisition Reform Act), and tons of haggling?

-- Scott Amey

Comments

[Posted on: Feb 17, 2009 at 12:20 PM]

Scott,

You know it is a felony for contractors to lie in proposals or to commit fraud on their books. My guess is the vast majority of contractors do neither; the rate of fraud might be no more than say, the rate of cheating on personal income tax, but that's just a guess. Just because contractor bids and books have not been audited or audited competently gives you no grounds--statistically, logically, even emotionally--to hold the consistent POGO weltenschang that most contractors are crooks.
As for bargaining to take advantage of the market, have it it. We're all taxpayers, and the government should get the best deal it possibly can. Contracting officers who don't attempt this need to be disciplined or fired. That's part of their sacred trust.
That said, many contracting officersfeel like real heroes for knocking a hundred basis points off fee, when the real dollar hit to the government might be in sloppily audited overhead costs (DCAA--not due to workload, but very poor quality management), or direct labor that is either not market priced, or where individuals fit the labor categories in a manner that builds in far too much profit.
The government has the means--all the time, not just now--to get a better deal than it does. It is just so poorly motivated and poorly managed to do this.

Speaking of motivation....
Dr. K of the K school consistently seems to think that the govt people need to be left alone, unsupervised, shielded from nasty (actually stupid) trade press articles, and pesky Congressional oversight. With no supervision of the government workers' sacred trust, he thinks the government will get the best value. That, more than anything else, suggests which side he may favor. He's in the minority of Democrats who don't believe in regulation. Look where that's got us in financial services.