Federal Procurement Reform: Change Takes More Than Words

1. Federal Procurement Reform: Change Takes More Than Words April 13, 2010

2. Introduction The Obama administration is currently working to finalize the Federal budget in a fashion more open and transparent than ever before. Still, accountability requires more than transparency. How well are agencies managing the procurement process? To examine these issues, MeriTalk surveyed the Federal procurement community, obtaining input on the current system and identifying key opportunities for improvement. State of the Union:“It’s difficult to work through the current bureaucracy and accomplish goals due to complicated processes and contract vehicles in place.” – Contracting Officer/Specialist 2 2 *http://www.recovery.gov/About/Pages/The_Act.aspx

3. Table of Contents • Executive Summary 4 • Key Findings 5 • Recommendations 14 • Methodology and Demographics 15 “Procurements are slow because the procurement organization is understaffed. [The] procurement process is confusing, necessitating rework and starting over. Procurement personnel are not held accountable for providing accurate procurement advice.” – Program/Project Manager 3

4. Executive Summary • Savings Opportunity: Federal procurement managers estimate they can save $158B each year with more efficient processes* • Room for Improvement: Currently 12% of Federal procurement managers give their agency an “A” for procurement process maturity • The Path Forward: • Improve Processes:Only 17% of agencies have implemented and are consistently using Earned Value Management (EVM); 14% have implemented and are consistently using Capital Planning and Investment Control (CPIC) • Focus on Training: 56% of Federal procurement professionals lack program management training; 59% lack EVM training, compounding staffing shortages • Improve Transparency:Only 18% say they plan to leverage technology innovations such as Web 2.0 to report contract ROI Bottom Line: Procurement impacts program performance 4 *For the purpose of this report, we define processes as the sum of all steps agencies take to procure goods and services

5. Savings Responsibility • Federal procurement managers estimate they can save 30% of their budgets with more efficient procurement processes 30% of the FY2008 budget* = $158B Savings opportunity in one year alone Take Away:Massive Savings Opportunity 5 *Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php

6. Management Responsibility • More than one-fourth of Federal programs are late or over budget No more than 10% of Federal programs over budget/schedule* (Today: 28%) Feds want 18% more programs on budget/schedule $95B in Federal programs that could be better managed (18% of FY2008 contract dollars**) The Goal The Gap 28% of Federal Programs are not delivered on time and on budget The Impact Take Away: Lack of Commitment 6 *http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/; * *Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php

7. Self-Assessment • Why do we have this opportunity? Only 12% of Federal procurement managers currently give their agency an “A” in procurement process maturity Agency Grades Top Challenges What is holding your agency back?* Please grade your agency on its procurement process maturity, including training: • 56% Processes • 48% Program/project management 46% Staffing • 37% Accountability • 32% Technology • 32% Oversight • 28% Contract vehicles • 12% A • 36% B • 27% C • 14% D • 4% F • 7% Unsure “[The] contracting office has set up multiple, sequential reviews that routinely result in procurements that take over one year to complete. Contracting office management doesn't acknowledge that some needs emerge over time and cannot be anticipated 1-3 years in advance so they require new contracts for every new need even if it's within scope of the original contract.” – Program/Project Manager Take Away:Process Not Making the Grade 7 *Managers asked to identify the top three procurement challenges for their agency

8. Raising the Grade: A How-To Guide 8

9. Priority: Improve Processes • Despite mandates and proven impact, Feds are not using EVM and CPIC Earned Value Management (EVM): Capital Planning and Investment Control (CPIC): 17% 14% Have implemented and are consistently using EVM Have implemented and are consistently using CPIC Agencies are required to use EVM for large procurements*. Take Away:What’s the Value of Empty Mandates? 9 *http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/, http://ca.com/files/TechnologyBriefs/integrate-it-with-mission-brief_199593.pdf

10. Why? • EVM/CIPIC makes a difference Procurement Grades By EVM Use* Procurement Grades By CPIC Use* The impact of EVM: 47% process maturity improvement The impact of CPIC: 33% process maturity improvement Graded A or B Graded A or B Graded A or B Graded A or B Agencies have implemented and consistently use CPIC Agencies have implemented and consistently use EVM Agencies have not implemented CPIC Agencies have not implemented EVM Take Away: Consistent Utilization = More Efficient Procurement 10 *Graded A or B in procurement maturity

11. Priority: Improve Training • More than half of Federal procurement professionals lack training in core competencies 59% 85% 56% • Lack EVM training • Lack CPIC training • Lack program management training “Staff, although they have had recent training, still need to be mentored and guided with regards to how to apply the training to their assignments. Therefore, they need to be mentored on how to prepare a solicitation document that is applicable to the requirement, [and how to] determine the best procurement method, and contract type.” – Senior Procurement Executive Take Away:You Can’t Mandate What You Don’t Teach 11

12. Transparency Issues • Procurement professionals say they want to improve transparency, but are not yet taking the plunge • Only 18% say they plan to leverage technology innovations such as Web 2.0 to report contract ROI • And only 21% say they plan to encourage citizen participation and actively address inquiries 49% But Say they want to increase top-down transparency and management Take Away:Lip Service Dis-Service 12

13. The Firm-Fixed-Price Debate • To streamline contract vehicles, the Obama administration has encouraged the use of Firm-Fixed-Price Contracts • Not all Feds agree with this approach – only one-third say it will improve program efficiency Will firm-fixed-price contracts improve success rates? No 38% Maybe 26% Yes 36% “Firm-fixed pricing limits spending, is usually achieved through open competition bidding, and allows the government to cancel at any time if it is in the best interest of the government/taxpayer.” – Senior Procurement Executive “We principally do research and development. Fixed-price contracts will call for higher cost proposals as contractors will want to mitigate the risk to themselves and their shareholders.” – Procurement Analyst “The current trend is to have all contracts be firm-fixed price. There are times when CPFF or T&M are more efficient or appropriate.” – Contract Officer/Specialist Take Away: One Size Does Not Fit All 13

14. Recommendations • Federal procurement managers offer advice from the front lines Federal procurement managers say agencies need to: Get With It: Use required best practices Get Smart: Invest in workforce education Get Hip: Embrace transparency mandates 14

15. Methodology and Demographics MeriTalk conducted the online survey of 200 Federal procurement professionals in January 2010. The total sample size equates to a margin of error of +/- 6.89% at 95% confidence for the group. 15

16. Thank You Liz Vandendriessche – MeriTalk evandendriessche@meritalk.com (703) 883-9000 ext. 146