Federal Procurement Reform:

Change Takes More Than Words

April 13, 2010

22

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

*http://www.recovery.gov/About/Pages/The_Act.aspx

•Executive Summary 4•Key Findings 5•Recommendations 14•Methodology and Demographics 15

3

Table of Contents

“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

• 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

4

Executive Summary

Bottom Line: Procurement impacts program performance

*For the purpose of this report, we define processes as the sum of all steps agencies take to procure goods and services

• Federal procurement managers estimate they can save 30% of their budgets with more efficient procurement processes

5

Savings Responsibility

*Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php

30% of the FY2008 budget* =

$158BSavings opportunity in

one year alone

Take Away: Massive Savings Opportunity

• More than one-fourth of Federal programs are late or over budget

6

Management Responsibility

*http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/;

of Federal Programs are not delivered on time and on budget

28%

Take Away: Lack of Commitment

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

The Impact

* *Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php

7

Self-Assessment

Take Away: Process Not Making the Grade

• Why do we have this opportunity? Only 12% of Federal procurement managers currently give their agency an “A” in procurement process maturity

12% A36% B27% C14% D4% F7% Unsure

56% Processes 48% Program/project management 46% Staffing37% Accountability 32% Technology 32% Oversight 28% Contract vehicles

Agency Grades Top ChallengesPlease grade your agency on its procurement process maturity, including training:

What is holding your agency back?*

*Managers asked to identify the top three procurement challenges for their agency

“[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

8

Raising the Grade:

A How-To Guide

Priority: Improve Processes

Take Away: What’s the Value of Empty Mandates?9

• Despite mandates and proven impact, Feds are not using EVM and CPIC

Agencies are required to use EVM for large procurements*.

*http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/, http://ca.com/files/TechnologyBriefs/integrate-it-with-mission-brief_199593.pdf

Earned Value Management (EVM): Capital Planning and Investment Control (CPIC):

17% 14%Have implemented and are

consistently using EVMHave implemented and are

consistently using CPIC

Take Away: Consistent Utilization = More Efficient Procurement

Why?

10

• EVM/CIPIC makes a difference

*Graded A or B in procurement maturity

79%

32%

0%

20%

40%

60%

80%

Agencies have implemented and

consistently use EVM

Agencies have not implemented

EVM

71%

38%

0%

20%

40%

60%

80%

Agencies have implemented and

consistently use CPIC

Agencies have not implemented

CPIC

Graded A or B

Graded A or B

Graded A or B

Graded A or B

Procurement Grades By CPIC Use*Procurement Grades By EVM Use*

The impact of EVM: 47%

process maturity improvement

The impact of CPIC: 33%

process maturity improvement

11

Priority: Improve Training

Take Away: You Can’t Mandate What You Don’t Teach

• More than half of Federal procurement professionals lack training in core competencies

“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

56%Lack program

management training

85%Lack

CPIC training

59%Lack EVM training

12Take Away: Lip Service Dis-Service

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%Say they want to increase

top-down transparency and management

But

13Take Away: One Size Does Not Fit All

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

“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

Will firm-fixed-price contracts improve success rates?

Yes

36%

No

38%

Maybe

26%“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

14

Recommendations

• Federal procurement managers offer advice from the front lines

Get With It: Use required best practices

Get Hip: Embrace transparency mandates

Get Smart: Invest in workforce education

Federal procurement managers say agencies need to:

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.

Organization Type

52% Federal Civilian

32% Department of Defense

16% Contractor

Title

3% Chief or Deputy Chief Procurement Officer

4% Senior Procurement Executive

25% Contracting Officer/Specialist

12% Procurement Analyst

32% Program or Project Manager

3% Contract Price/Cost Analyst

21% Technical Analyst/Specialist

100% are involved in the Federal procurement and acquisition process

Thank You

Liz Vandendriessche – MeriTalk

evandendriessche@meritalk.com

(703) 883-9000 ext. 146