NATIONAL BUREAU OF STANDARDS

The National Bureau of Standards 1 was established by an act of Congress March 3, 1901. The Bureau's overall goal is to strengthen and advance the Nation's science and technology

and facilitate their effective application for public benefit. To this end, the Bureau conducts

research and provides: (1) a basis for the Nation's physical measurement system, (2) scientific and technological services for industry and government, ( 3 ) a technical basis for equity in trade, and (4) technical services to promote public safety. The Bureau consists of the Institute for Basic Standards, the Institute for Materials Research, the Institute for Applied Technology,

the Institute for Computer Sciences and Technology, and the Office for Information Programs.

THE INSTITUTE FOR BASIC STANDARDS provides the central basis within the United

States of a complete and consistent system of physical measurement; coordinates that system

with measurement systems of other nations; and furnishes essential services leading to accurate and uniform physical measurements throughout the Nation's scientific community, industry, and commerce. The Institute consists of a Center for Radiation Research, an Office of Measurement Services and the following divisions: Applied Mathematics — Electricity — Mechanics — Heat — Optical Phyrics — Nuclear

Sciences 2 — Applied Radiation 2 — Quantum Electronics 3 — Electromagnetics 3 — Time

and Frequency 3 — Laboratory Astrophysics 3 — Cryogenics \

THE INSTITUTE FOR MATERIALS RESEARCH conducts materials research leading to improved methods of measurement, standards, and data on the properties of well-characterized

materials needed by industry, commerce, educational institutions, and Government; provides

advisory and research services to other Government agencies; and develops, produces, and

distributes standard reference materials. The Institute consists of the Office of Standard

Reference Materials and the following divisions: Analytical Chemistry — Polymers — Metallurgy — Inorganic Materials — Reactor

Radiation — Physical Chemistry.

THE INSTITUTE FOR APPLIED TECHNOLOGY provides technical services to promote

the use of available technology and to facilitate technological innovation in industry and Government; cooperates with public and private organizations leading to the development of

technological standards (including mandatory safety standards), codes and methods of test; and provides technical advice and services to Government agencies upon request. The Institute consists of a Center for Building Technology and the following divisions and offices: Engineering and Product Standards — Weights and Measures — Invention and Innovation — Product Evaluation Technology — Electronic Technology — Technical Analysis — Measurement Engineering — Structures, Materials, and Life Safety 4 — Building

Environment * — Technical Evaluation and Application 4 — Fire Technology.

THE INSTITUTE FOR COMPUTER SCIENCES AND TECHNOLOGY conducts research and provides technical services designed to aid Government agencies in improving cost effec- tiveness in the conduct of their programs through the selection, acquisition, and effective

utilization of automatic data processing equipment; and serves as the principal focus within

the executive branch for the development of Federal standards for automatic data processing

equipment, techniques, and computer languages. The Center consists of the following offices and divisions: Information Processing Standards — Computer Information — Computer Services —

Systems Development — Information Processing Technology.

THE OFFICE FOR INFORMATION PROGRAMS promotes optimum dissemination and

accessibility of scientific information generated within NBS and other agencies of the Federal Government; promotes the development of the National Standard Reference Data System and

a system of information analysis centers dealing with the broader aspects of the National Measurement System; provides appropriate services to ensure that the NBS staff has optimum

accessibility to the scientific information of the world. The Office consists of the following

organizational units: Office of Standard Reference Data — Office of Technical Information and Publications —

Library — Office of International Relations.

1 Headquarters and Laboratories at Gaithersburg, Washington, D.C. 20234.

a Part of the Center for Radiation Research.

3 Located at Boulder, Colorado 80302.

4 Part of the Center for Building Technology.

Maryland, unless otherwise noted; mailing address
fimsi Bo?aaa of Sicr4®pS|

it? m

-The Creative Partnership:

' Government and the Professional Services

v-3S3

^

Proceedings of the Fourth Users-Producers Conference

Sponsored by the Technical Analysis Division,

Institute for Applied Technology, National Bureau of Standards,

In Cooperation With

The Center for the Study of Private Enterprise

The American University

Held at the National Bureau of Standards,

Gaithersburg, Md., January 23, 1973

Edited by

James D. Johnson

Director, the Center for the Study of Private Enterprise

The American University

Washington, D.C. 20016

U.S. DEPARTMENT OF COMMERCE, Frederick B. Dent, Secretary

NATIONAL BUREAU OF STANDARDS, Richard W. Roberts, Director

j

fL • 0 * Issued August 1973
Library of Congress Catalog Number: 73-600194

National Bureau of Standards Special Publication 383

Nat. Bur. Stand. (U.S.), Spec. Publ. 383,142 pages (Aug. 1973) CODEN: XNBSAV

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 (Order by SD Catalog No. 03.10:383-). Price $2.10
TABLE OF CONTENTS

FOREWORD v

Jimmy D. Johnson

PREFACE vi

John E. Moriarty

INTRODUCTION TO THE CONFERENCE 1

W. Edward Cushen

PROBLEMS IN GOVERNMENT PROCUREMENT OF

PROFESSIONAL SERVICES 5

James C. Corman

PANEL PRESENTATIONS

1. PANEL ONE: DEVELOPMENT OF THE PROBLEM 1 9

MANAGEMENT INFORMATION AND COMPUTER SYSTEMS 2 1 Ruth M. Davis

MANAGEMENT CONSULTING 2 9

William P. Sommers

ARCHITECTURE AND ENGINEERING 4 2

Jerome R. Dunn

OPERATING LEVEL PROBLEMS IN PROCUREMENT 4 6

W. Edward Cushen

PANEL DISCUSSIONS, COMMENTS AND QUESTIONS 57

2. PANEL TWO: THE PROCUREMENT PROCESS 6 7

GOVERNMENT PROCUREMENT POLICY 6 9

Peter Waterman

THE RELATIONSHIP OF PRIVATE ENTERPRISE TO

GOVERNMENT PROCUREMENT 74

Robert W. Kreuger

LEGAL ASPECTS OF GOVERNMENT PROCUREMENT 7 9

Gene Perry Bond

A PROPOSED GOVERNMENT SYSTEM FOR

PROFESSIONAL SERVICES 8 7 John E. Moriarty

PANEL DISCUSSION, COMMENT AND QUESTIONS 94

iii
3. PANEL THREE: MANAGING THE PROJECT 105

GOVERNMENT PROJECT MANAGEMENT 10 7

T. Fred Noble

MANAGING THE PRIVATE CONTRACTOR 110

Richard A. Walbrecker

MANAGING THE UNIVERSITY RESEARCH TEAM 1 1 5 Robert P. Boynton

PANEL DISCUSSION, COMMENT AND QUESTIONS 12 3

SUMMARY OF CONFERENCE 1 2 9

W. Edward Cushen

iv
FOREWORD

These proceedings are the result of a short conference

in which the participants discussed, in an open and frank manner,

the problems of providing professional services to the Federal

Government. The unique character of these proceedings is their

straightforward delineation of problem areas and proposed

solutions. No punches were pulled! In addition, they serve as

a valuable informational input to professionals or professional

service firms attempting to provide their services to Government.

The contributions are many and varied. William Sommers

portrays the procurement process in cogent and organized terms;

Dr. Cushen's contribution in stating the twenty-three problem

areas and accurately summarizing the recommendations of the

conferees is a valuable step forward toward solution of mutual

problems. Gene Bond portrays, in a step-by-step fashion, both

the pre-contract and contract remedies available to private

industry. A new method for procuring professional services is

set forth by John Moriarty. The knowledge in this presentation

would have been a sufficient contribution for the entire

conference. Each speaker and panel was productive. It only

remains to follow upon this conference with the action required

to mitigate the problem so clearly formulated. These proceedings

stand as a valuable first step in this process.

The American University Center for the Study of Private

Enterprise has been proud to participate in this endeavor. The

editor wishes to acknowledge the cooperation of the staff at

the Technical Assistance Division of the National Bureau of

Standards, with special thanks to Dr. Walter Cushen, Mr. John

Moriarty and Mrs. Ruth Ciufolo. Mr. John Magnotti, Executive

Secretary of the National Council of Professional Services Firms

in Free Enterprise, offered valuable assistance, and served as

the catalyst for action. Bowers Reporting Company, of Falls

Church, Virginia, prepared the verbatim transcript and the final

copy for printing. Finally, the staff of the Center, Mrs.

Rebecca Burns, Mrs. Kathy McKnight, Mr. Herb Schock, and Mr.

Pete Franzen, deserve the thanks of all concerned for their

cooperation and dedication to the objective we all sought.

Dr. J. D. Johnson,

The American University,

March, 1973.

v
PREFACE

This Conference is the fourth in a series designed to

highlight the systems approach to large scale Government problems.

The first Conference in this series was held in 1966 which emphasized

the role of OR Analysts and what they could do in Government. In

1969 a second Conference was held which looked at both the private

sector and Government agencies and attempted to define what Government

expected of private agencies and visa-versa. In 1970, case studies in

Federal domestic policy were presented at the third Producers -Users

Conference in an attempt to determine exactly how the roles of

Government and private agencies fitted together. Finally, in 1973,

the fourth Users -Producers Conference was held to consider the

procurement problems in providing professional services to the

Federal Government. The main thrust of this Conference was to

acquaint interested individuals from both the public and private

sectors with the problems and opportunitites of Government utilization of professionals and professional service firms.

It is hoped that this Conference has brought insight into

the many procurement problems encountered when Government agencies use professional service firms and the numerous advantages obtained

by utilizing these services.

John E. Moriarty

Technical Analysis Division

National Bureau of Standards

May, 1973

vi
INTRODUCTION TO THE CONFERENCE

Dr. W. Edward Cushen

Chief

Technical Analysis Division

National Bureau of Standards

ON BEHALF OF THE NATIONAL BUREAU OF STANDARDS, welcome

to our campus. As most of you know, the National Bureau of

Standards is one of the most important scientific assets of the

nation. We hope you will make yourselves at home while you are

here .

I would also like to welcome you on behalf of the

Department of Commerce. The Department of Commerce has as one

of its primary purposes the fostering, stimulating and promoting

of the business activities of our nation. It is beneath that

rubric and under the scientific rubric of the National Bureau

of Standards, that we offer this workshop session.

We also welcome you on behalf of the Technical Analysis

Division, one of the line divisions of the National Bureau of

Standards. The Technical Analysis Division was created eight

years ago to address the question of using the systems approach

more productively by the civil agencies of Government. We have

been running conferences similar to this since the inception of

the TAD. Each conference has taken a different form. This one

addresses itself to a specialized question that is of pressing

concern to Government and business.

We also welcome you on behalf of the National Council

of Professional Services Firms in Free Enterprise, a co-sponsor,

co-developer and co-designer of this Conference. This organization has provided much of the needed material used to focus our

attention on productive questions and to avoid simply another

"professional society" set of presentations.

We further welcome you on behalf of the Center for

the Study of Private Enterprise of The American University.

Finally, we welcome you on behalf of the American

people. Our Government exists for the purposes of the American

people. In our system of government there is no legitimate

power except that which is surrendered by the American people to

its Government to act in the best interests of the people.

This Conference is intended to be a workshop and a sharing of information. The question that permeates this

Conference is: how is it best possible to provide professional

service, advice, consulting and contract work from the private

sector to the Federal Government?

This Conference will therefore be a working and

informat ion- sharing experience, based upon the eight years

experience of the Technical Analysis Division, in attempting

to help the Government start to use the systems approach.

3
Troublesome questions keep recurring, and these tend

to be of two dimensions. The first dimension consists of those

who do not know the system now in operation for procuring

Government services. On the other hand, the second question is

how can we modify some attitudes to make it possible for the

vast productive potential of the American free enterprise

system to contribute an increasing share to the management of

the Government?

In this Conference, we will probably be talking

negatively to some extent. There may be criticisms of ourselves

and criticisms of Government. From this Conference I hope we

can emerge with a set of recommendations that may be introduced

into Governmental systems so that you can go home to your own

private industries with suggestions for improved service and

for improved marketability of your assets. What I am looking

for today are suggestions as to how Government agencies can

better utilize your assistance.

Today we will be emphasizing procurement for the civil

Government agencies. We will be taking a broader approach than

systems analysis or operations research; hence the theme of the

Conference: "Professional Services." We have expanded the

subject to include the contributions of the management

information systems and the computer world, architectural and

engineering services, and those of the consulting engineer and

the management consultant. We will be interested in exploring

the points of contact between industry and Government, trying

to ferret out those aspects that need attention.

The Conference is broken into three sections; the first

section is devoted to developing the nature of the problem.

In the second and third parts of the Conference, we

will be addressing two specific processes that seem to be

particularly troublesome to the worlds of industry and

Government

The first of these processes is the procurement process.

The second process is that of managing the contract once it

exists. We will also take heed of the lessons that have come

from the productive work of those who are contracting to

Government

By the end of the day I hope to be able to assemble a set of draft recommendations that I would like to place before

you. If these appear to be productive, I will then reproduce

them and mail them to you for your appraisal. I am sure we

will have a productive day.

4
PROBLEMS IN GOVERNMENT PROCUREMENT OF PROFESSIONAL SERVICES

The Honorable James C. Corman

United States Congressman (California)

Chairman, Sub-Committee on Government Procurement

Select Committee on Small Business

I WANT TO JOIN ALL THE PARTICIPANTS in thanking the

National Bureau of Standards, The American University, and the

National Council of Professional Services Firms in Free

Enterprise for staging this Conference. I am sure it is useful

to you who are in the business community and of value to the

Government, because as you know, we spend an awful lot of money

and we need to spend it more efficiently. There is always room

for improvement. I think this kind of crossbreeding of views

and information is most useful.

I want to thank all the people who are here who helped

put this together, Dr. Krueger, John Magnotti, Jim Hostettler,

Dr. Walter Cushen, John Moriarty and Dr. Jimmy Johnson.

I would be remiss if I did not thank two gentlemen who

are extremely helpful to me. In the course of getting to know

each other better maybe you will drop around to my office,

particularly those of you who are in small business. We can

sometimes be helpful, and if we can at all, it is because Bob

Ruben, my Administrative Assistant and Henry Robinson, who is

Chief Counsel for our Subcommittee are available to help.

Not long ago Jack Anderson evaluated all of the

Congressmen. He had one category of people that he said had

good staffs that make poor Congressmen look good and good

Congressmen look better. I want you to know that Bob and Henry

make me look good.

Small Business has Been Deprived of Opportunity to Perform

I think that small businesses have a capability of

doing work and that they have been deprived of the opportunity

to perform in the professional research and technical services

for the Federal Government.

The industry provides professional services of all

kinds, including management consultants, architects and

engineers, systems analysis, data processing, research and

development. There are also organizations performing a variety

of studies.

It is an eight to ten billion dollar industry. It is

composed of 11,000 firms, over 90 percent of which are small

business. However, they get something between five and six

percent of the money that the Government spends. If anybody

thinks that the small business community is doing well in this

field listen to these figures.

7
DOD last year spent $5,168,000,000 in this field.

Large firms got $4,913,000,000. Small firms got $255,000,000.

Over at NASA, they spent $2,003,000,000. The large firms got

$1,889,000,000, the small firms $114 million.

Educational non-profit institutions received

$631,000,000 from DOD and $55,000,000 from NASA.

I thought I might discuss with you some observations

that were made by our Subcommittee on Government Procurement last

year, and also some of the observations and recommendations made

by the new Procurement Commission.

Our Procurement Subcommittee, in its October 1972

report, said:

"The reporting procedures followed by

the Administrator of GSA, in his Governmentwide responsibilities to assemble and

publish the small business performance records

of civilian Executive agencies, do not include

separate listings as to their R$D procurements."

Specific Information Needed

This is always the trouble we have. Government

witnesses come in to testify to us, and without exception, whatever the law says that they ought to do, they can tell you that

they have done it and done it well. But then when you try to

sort it all out and find out the specifics, the information

that you need is not available to allow an independent judgment

based on actual facts. That is one of the areas that I am

hoping we will be able to find out a little more about. What is

the situation as to the specifics in this highly sophisticated

and difficult area?

Federal Grants Have Skyrocketed

The Procurement Commission in its summary report

reviewed Federal grant-type assistance programs, because of the

importance of such activities and the uncertainty of their

relationship to procurement. The stated purpose of this review

was to gain an understanding of the significance of the interchangeable use of grants and contracts, to the extent to which

procurement rules and regulations are or should be applied to

such grant-type assistance programs.

8
Federal grants to states and local governments have

skyrocketed. They were $2.2 billion in 1950, and they grew to

$43.5 billion for Fiscal Year 1973.

While the Federal Government grants to non - government a 1 recipients are said to have risen significantly in the same

period, the Procurement Commission's summary report does not

provide relevant statistical information.

Our Subcommittee staff has inquired, trying to

develop the rather surprising information on statistics of

non-governmental grants only to find that they were not

available. The National Income Accounts, the Special Analysis

of the U.S. Budget and the Office of Management and Budget

Catalog are the principal sources of information, and they are

scant

.

A Look At A-76

Our Subcommittee tried to take a look at 0MB Circular

A-76 last year.

It purports to establish a Federal policy and practice

of preferential use of the private commercial sector in securing

necessary services for Government. As you know it makes a very

fine and firm statement about the free enterprise sector. If

you read the first part it is great. When you get down to the

exceptions, they are troublesome.

The practical effect has proven to be less than

totally satisfactory. Federal agencies have increasingly used

A-76 to favor in-house provisions of professional, technical

and research services, rather than acquiring them through

private sources.

The General Accounting Office, in its recent report on

the subject, describes a number of discrepancies in the way 0MB

implements A-76. Also, the Department of Defense alone spends

more than $6 billion annually for in-house activities to

provide commercial and industrial services and products.

Further reviews and reports of in-house performance

by the Federal agencies are far behind schedule.

Our Committee recommended that we reframe Circular

A-76 in a way which can leave no doubt that it is the policy

of the Federal Government to rely on the private sector firms

in the procurement of property and services for the Government.

The Commission's report pointed out that historically

9
Government policy has favored contracting for goods and services

rather than providing them in-house. Executive Branch

procedures for the policy's application have been subject to

controversy

.

For almost 40 years Congressional Committees have

studied various aspects of Government activities that are or

may be in competition with private enterprise. The Second

Hoover Commission Report contained 22 recommendations designed

to eliminate or substantially decrease Government activities

competing with private enterprise.

In 1971, 0MB requested a special report from the

agencies on the status of their commercial and industrial

activities. Only 99 out of 15,000 activities reviewed were

discontinued or curtailed. That is 99 out of 15,000 items that

were in-house. That leaves 14,101 still being done by the

Government

.

Reliance Must Be Placed on the Private Sector

The conclusions and recommendation of the Commission

was that a policy of reliance on the private sector for goods

and services is fundamental and should be stated in the law. It

was their conclusion to say, through legislation, that it is

national policy to rely on private enterprise for needed goods

and services, to the maximum extent feasible, within the framework of procurement at reasonable prices.

Current Cost Comparison Creates "In-House" Impetus

In the matter of cost comparisons our Committee while

looking at A-76, noted that it allows a Government agency to

make cost comparisons of contract costs including overhead and

profit, of private sector firms as compared with the cost of

Government personnel on an incremental basis without the

overhead factor.

Clearly this kind of cost comparison provides an

excuse in many cases for work to be done by the Government

in-house. The unwillingness of many Federal Departments and

agencies to fully disclose the details of their comparisons

for evaluation by outside interested parties raises serious

questions about the integrity of the policy and the economic

soundness of many of the decisions.

Full disclosure and proper accounting is necessary.

The Commission Report concerning costs of in-house

performance did not go quite as far as we did. They said:

10
"There should be estimated on a fully

allocated basis in some situations and on

an incremental basis in others, comparisons

of the cost for in-house or procured services."

A-76 does not require cost comparison whenever the

products or services involved cost less than $50,000 annually.

There is reason to believe that adequate competition exists.

The Subcommittee went on in its findings to point out

that our hearings established the trends toward utilization and

support of non-profits and not-for-prof its for work among the

Executive Departments and agencies.

The Grant Process Should Be Analyzed

In large measure, these non-profits and not -for-profits

engage in professional research and technical work. They are

the "think-tanks." They range from small operations involving

two or three professionals to large groups in the hundreds. The

Federal Government has been rapidly expanding requirements for

these kinds of services but has failed to sharply formulate

regulations and policies which limit non-profits and not-forprofits to their proper role.

The most dramatic technique to move Federal funds to

the non-profit or not-for-profit entity is the Federal grant.

Limited by its term to public or non-profit entities, it is used

automatically in many instances to acquire services available in

the private sector. Even where statutory flexibility exists to

choose to contract with a for-profit firm, or make a grant to a non-profit, the choice usually is made to use the grant. The

middle-level manager is not required to justify the grant to

the same extent that he is required to justify contracting to

the private sector.

Whether the use of non-profits is sound national

policy has been seriously questioned by GAO in a recent report

entitled: "Fees Allowed Non-Sponsored Not-For-Profit Organizations By Various Government Agencies."

The Comptroller General points out that such

organizations are often allowed the same rate or fee as

commercial organizations for similar work although they pay

no Federal income taxes on fees earned for Government work.

The Comptroller General has asked 0MB to develop a Governmentwide policy on negotiated fees for non-profit organizations.

It is recommended, pending development of such a policy, that each agency should re-evaluate its current policy

and take steps necessary to insure that fee payments are

11
adjusted to recognize the tax-free status of non-profit

organizations

.

FCRC: A Serious Example

Our hearings focused attention on one group of

organizations collectively referred to as FCRC's, Federal

Contract Research Centers, such as RAND and Mitre Corporation,

representing a particularly serious example of the not-for-profit

prob 1 em

.

The FCRC's get all their Federal business without

competition. Originally formed shortly after World War II to

assist specific Federal agencies in the performance of

activities which at that time were not available from private

sources, such as analytical problem-solving and systems analysis

emphasis, the FCRC's have attempted to expand their role rather

than to contract it as private sector capabilities have

developed to perform the same tasks.

Congress recognized this problem in reviewing the

1971 DOD appropriations and recommended a significant reduction

in the level of funding for FCRC's. This is clearly desirable,

since most of the work performed by FCRC's could and should be

done in the private sector.

The Subcommittee is particularly concerned that the

Secretary of Defense has urged non-Defense Departments and

agencies to use the services of DOD sponsored FCRC's. Many

Departments and agencies have implemented the Secretary's

suggestion

.

Each time a task is assigned to an FCRC on a noncompetitive basis, a major opportunity is potentially lost by

the small business private firm. The role of all non-profits

and not-for-prof its in receiving Federal funds, either by

contract or grant, requires reexamination.

In this same field, the Commission report pointed

out that major changes are being made in the roles of public

and private sector R§D performance, and the relationships

between them. The Commission concluded that the universities

should continue to be the primary performers of basic research,

but that industry should be the primary source of applied

research and product development.

Also, in-house laboratories should be strengthened

and should maintain a technical competence to properly sponsor

and manage the R§D programs as well as to perform basic and

applied research to carry out the required tests and evaluation

functions

.

12
The Federal ly- funded research and development

centers, including the Federal Contract Research Centers,

as they are designated by the Department of Defense, have

provided unique assistance in technical management functions

for the Government. The option to use such resources should

be continued, but under more specific guidelines for initiating

and terminating such organizations.

The National Science Foundation, the National Bureau

of Standards and experimental incentive programs with consortia

of organizations, should be followed closely and their results

translated actively into practical applications.

We made some recommendations concerning new uniform

guidelines for awards to non-profits. We hope that the

hearing departments will give some attention to them.

I want to tell you why I feel very strongly about the

importance of small business for profit. As was mentioned, the

Small Business Committee is really only a second committee for

me. I consider it very important, though in the scheme of

things in the House it is not very important. I serve on the

Ways and Means Committee and, as you know, this country is in

great financial trouble. A part of the trouble is because

of the organization of the House.

There are 25 of us on Ways and Means. We have to

raise all the money the other 410 spend. As you know, we ran

about $30 billion behind them.

Every time a small firm is successful in getting a Government contract and makes a profit, 48 percent of the profit

comes to Government. That ought to be borne in mind by the

procuring agencies when they sharpen their pencils and try to

find out where they are going to get the cheapest buy.

I have been toying around with a tax reform bill

that I would like to call to your attention. It is an easy

number to remember, HR 1040. Some of you may fill out that

form. It is not directly related just to your business, but

it will have a substantial effect on your business. Every one

of you who is in the business of providing material or

professional advice, software or whatever else, to the

Government, is in that category of taxpayers that pays

48 percent of your profit to us in taxes. I want you to know

I appreciate it and I am delighted. I do not plan to try to

cut it to 47 percent.

But there are lots of people in the business

community who do not pay any taxes, and there are a great number

of others who do not pay much. The reason all that came about

13
was because, over the years, the Federal Government has fallen

prey to the persuasion that there is some great social or

economic purpose which can be accomplished through a tax

incent ive

.

For instance, back in 1926 we thought we might run

out of gas. Henry Ford was building so many Model T's we just

did not know where we would get the needed gasoline. So we

evolved a tax system for the oil industry. We gave them oil

depletion allowances, intangible drilling costs, and all kinds

of incentives that made it possible to go out and prospect for

oil.

The fact of the matter is that many of you here who

have 5, 6 or 7 employees, and have a tough time getting the

Government to do business with you, pay as much total dollars in

taxes as some of the five or six largest oil companies in this

country. That is not sound and it is not fair. We ought to

revise our tax structure. We should not try to influence how

people invest their money depending on what tax breaks they

must pay. We should leave it to a free economy so that the

dollars for investment will flow where the promise of profits is

high, not where the promise of taxes is low.

I suppose I have become a convert to small business

because of the things I have listened to over the years in the

Small Business Committee. I suspect, if there is one great

threat to the free enterprise system, it has to do with the

growth and size of business entities, both vertically and

horizontally, and it seems to snowball.

I fear that someday AT&T may own most of the productive

capacity in this nation. When we sort it all out we will find

out that AT§T has just been purchased by Big Boy Restaurants.

This is what happens in conglomerates.

If we ever lose the opportunity for a man with a very

little bit of capital, a lot of courage and the brain to enter

into the business community, to compete fairly and to grow, we

will have lost the real vitality of the free enterprise system.

I hope that we never do that.

Questions From The Floor

QUESTION: "Mister Congressman, you gave some

indication that some changes may be in the offing with respect

to the way contract funds are allocated from the Government. Is

that a disposition within the Committee, or do you see some real

chance of that kind of orientation?"

14
CONGRESSMAN CORMAN: First of all, many of you

perhaps know that our Committee is not a legislative committee.

We are an "oversight" committee.

The law says that small business must get a fair share

of the Government procurement dollar. That certainly would

include the kinds of dollars we are talking about here. Of

course the big whirl gets to be: what is a fair share? I would not want to tell you that all of the Members of Congress

are as sensitive to the problems faced by small business as our

own Committee because we spend a lot of our time listening to

the problems.

On the other hand, we have been tolerably successful in

getting a change of attitude in the Executive Branch. I think

that one of the significant new factors in Government procurement

is going to be the Procurement Commission.

It is new, and it is designed specifically to try to

figure out how we can best spend procurement dollars, how can we

get more than we are getting now and how can we avoid some of

these gigantic overruns.

As a matter of fact, when I prepared my remarks I tried

to run down what our recommendations have been and what theirs

were. I will tell you they have not gone nearly as far as I would like for them to have gone in some of their recommendations.

On the other hand, I detect that they are listening to us. One

of the reasons is that Frank Horton is also on the Small Business

Committee and serves on our Procurement Subcommittee.

So he has been conditioned, and Chet Hollifield is a pretty good fellow and I spend a good deal of time talking with

him. Chet fortunately is a small business man from Montebello;

he is a haberdasher. He understands the problem of a haberdasher

surviving when he is across the street from the May Company.

But it is not easy, and I think there is this general

attitude in Government, and perhaps it is tougher in your line

of services than in others, that the guy who knows his

professional career is on the line when he makes a decision feels

that

:

"Well, if I go with somebody that is big

and established and they screw up, nobody is

going to notice me, but if I step out and

select somebody who is small, relatively new,

does not have a great track record, and things

go wrong, I have a lot of explaining to do."

15
We try constantly to overcome that attitude. I think some of the things that we have done, particularly in the

procurement field such as provisions for set-asides and

annually having the procuring departments come in and testify on

what percentage of their dollars has gone to small business, is

helpful. It is the reason I hope we can get them to break this

out in their statistical data because this is in many ways the

toughest area of all.

We do not have any not-for-profit airplane makers. We

have "for-loss" airplane makers, but we do not have any not-forprofit airplane makers. Not only are you in a sense competing

with big for-profit corporations, but you also compete with

these folks who really do not have to come in and bid. They

just kind of come in and talk about grants and things, and you

feel kind of safe because you know they are not going to make

any money. As I pointed out earlier, that does not enchant me

very much.

QUESTION: "One thing that bothers me a little bit, I do not believe the Government does a fair or accurate job of

costing when they estimate in-house costs."

CONGRESSMAN CORMAN : If you really think about it, if

you just look at the people who are sitting down doing the work

and add up their costs, you have not gone very far.

They have to be in a building someplace. They have to

have people over them who are managing. The one factor that we

really have not gottem them to think about yet is that

48 percent which is our take.

QUESTION: "You mentioned that your Committee needs

statistics on the kinds of procurement being contracted by the

Federal Government. At the General Accounting Office we can

track procurement statistics from DOD, through what they call

their 'DD-350' system that generates this data.

"But when we go to the civilian agencies to get

comparable statistics, we run into a problem. They do not have

this kind of a statistical base. What kind of statistics will

your Committee need to keep its oversight of procurements across

the board?"

CONGRESSMAN CORMAN: I would like very much for you to

discuss that in some detail with Henry Robinson. He is the man

I look to to try to help us piece it all together.

What we like to do is look at this pie of dollars and

say

16
"How much did you dump into procuring

professional services, and of that, what

slice went to the not-f or-prof its? What

went to large business and what went to

small business?"

So being able to feed in the statistics that give us

that kind of picture is most helpful. I am sure Henry can give

you a more intelligent and detailed answer than I can.

QUESTION: "Mr. Congressman, how do you feel the

Congress will react to the report of the Commission on

Government Procurement?"

CONGRESSMAN CORMAN : I think when they make recommendations for legislation we will probably adopt them. I think that

considering the people who are on it and considering the

attitude of the Congress at the moment, there is a strong

probability that their recommendations will be adopted.

We are fussing with lots of people about lots of

things right now. We are distressed, and we catch hell when we

go home, when people think that the Government is wasting their

money. We do not produce money. We just collect it and spend

it, hopefully in the public interest and hopefully efficiently.

There are some indications from time-to-time in the

press that maybe we are not totally successful. I think that

Congress will be eager to support that Commission's recommendations.

Many of those recommendations will involve the

Executive Branch and potential changes. I could not tell you

for sure what the attitude there will be. I do not think we

have the same kind of potential confrontation between the

Executive and Legislative Branch in this area that we do have

in some other areas.

Thank you all very much.

17

PANEL ONE: DEVELOPMENT OF THE PROBLEM

MANAGEMENT INFORMATION AND COMPUTER SYSTEMS

Dr. Ruth M. Davis

Director

Institute for Computer Sciences and Technology

National Bureau of Standards

Washington, D. C.

THE FIRST ITEM THAT NEEDS CLARIFICATION IS THE PROBLEM to

which I am addressing these remarks . That problem is the one encountered

when professionals from government and the private sector meet in order

to arrange for procurement of computer services, computer products or

both, or computer- related services such as operations research, systems

analysis and systems design efforts. Within this general problem area,

we can put particular emphasis on large topics such as management information systems, applications programs and systems design/analysis efforts.

There is a high level of activity on this problem front because

the government has approximately 6000 computers in its possession which it

either rents or buys . The latest General Accounting Office report of

August 1972 estimated that the annual operating cost of the Federal inventory of computers was about $4 to $6 billion annually. They estimate that

over $2 billion a year is spent on software maintenance services and that

the rental of ADP equipment alone amounted to $451 million in fiscal year

1971. In addition, we estimated, in testimony which I gave to Congress in

May 1972, that in this period of time, the Federal government spent some- where between $100 and $150 million annually in identifiable research and

development efforts in the computer field.

As a result of this widespread use of computers and computer

services, as a result of the dependency of government agencies on computers

for functions integral to their mission and their internal management responsibility and as a result of the sizeable amount of research and development ex- penditure, there is considerable interest in improving the means by which the

Federal government can procure the services and products which it needs in the

computer field.

By Congressional legislation of 1966, which is generally referred

to as the Brooks Bill, the Federal government has established central management authority in the computer field. That authority is shared by three

agencies, the Office of Management and Budget, the General Services Administration and the Department of Commerce through the National Bureau of

Standards. This law provides GSA with exclusive authority for procuring

all general -purpose ADP equipment for use by Federal departments and agencies.

It reserved to individual agencies, however, the right to determine ADP

requirements, to develop specifications for computers and to determine the

use to be made of the computer systems. The Department of Commerce was required by the law to provide GSA and other agencies, upon request, with

technical advisory services pertaining to ADP and related systems. In

addition, the Department of Commerce was directed to develop mandatory

Federal standards for computer equipment, computer software and computer

data.

21
Additionally, the Brooks Bill assigned the Office of Management

and Budget (OMB) the responsibility of exercising fiscal and policy control

over GSA and NBS in the implementation of their respective responsibilities

set forth in the law.

As a result of this and OMB implementing directives to the Brooks

Bill, there is a set of formal documented rules for procurement in the com- puter area by the Federal government. These formal documented rules cover

hardware, software and communications. There are no formal rules for procurement of research and development services by the Federal government

nor are there any rules governing the obtaining of professional services

related to but not directly producing either software, hardware or computer

equipment. As a result, the kinds of services which are designated systems

design, systems analysis, operations research, management consulting and

research and development of any kind are governed only by the individual

grant and contract authorities of each Federal agency or organization.

The only central authority in this regard is that which was directed upon the National Bureau of Standards by OMB in a letter of

December 1966 to the Secretary of Commerce. In that letter, the National

Bureau of Standards was directed to conduct an annual review of the accom- plishments of and programs for research in computer sciences and techniques

in conjunction with OMB, the Office of Science and Technology and other

government agencies engaged in or sponsoring research in computer sciences

to assess accomplishments and to provide guidance for programs. That particular authority, if exercised, would enable guidance to be supplied

by the central management agencies in the carrying out of Federal agency

R§D programs in computer sciences and technology. That authority has

never been exercised. It is our intent to ask the Bureau of Standards

to initiate this kind of a' review in 1974.

The GSA procurement regulations governing procurement of hardware,

software and communications in the computer field are known as Federal

Property Management Regulations (FPMR's). Those pertaining to computers

fall under Part 101-32 of the Federal Property Management Regulations.

Presently, there is only one OMB circular devoted entirely to procurement

in the computer field; that is, OMB Circular No. A- 54 amended as of August

26, 1971: its subject is "Policy on Selection and Acquisition of Automatic

Data Processing Equipment." The 1971 amendment encouraged the use of

computer performance evaluation techniques by government agencies.

There are other OMB circulars containing within them provisions

relating to the use of computers by government contractors and the use of

computers by state and local governments where some portions of the funds

for the systems or services in question are provided by Federal agencies.

The problems encountered in computer area procurement activities

by Federal agencies are separable into the problems of acquisition and

use of software, acquisiton and use of equipment, acquisition and use of computer services and, finally, acquisition and use of professional

services related to computer systems. The GSA maintains a Federal Supply

Schedule for both hardware and software. In general, procurement of

hardware can occur by simply placing a purchase and/or delivery order

against an applicable Federal Supply Schedule item. If equipment is

22
being procured which is not on the Federal Supply Schedule then the

terms under which that can occur are delineated rather thoroughly by

GSA procurement and contracting procedures . One of the principle

areas of change in equipment procurement involves peripheral equipment.

GSA has initiated a government -wide program to replace existing leased

peripheral devices with lower cost plug-to-plug compatible equipment

offered by independent suppliers. This program was aimed at permitting

competitive offers of peripherals by independent suppliers and by re- quiring mult i -vendor equipment systems when costs could be reduced by

obtaining peripheral equipment suppliers. Annual savings have been

reported early since this program was initiated. A recent NBS report

which has received considerable publicity is aimed at determining the

need for appropriate interface standards which could be used in procurement by the Federal government. That report recommended against

a single interface standard but did state the desirability of interface standards for large volume peripheral equipment widely used

within the government and for which a continuing market was predicted.

This kind of market is exemplified by magnetic disks, magnetic tapes

and magnetic cassette memories, for example.

Just this last fall, GSA demanded a disclosure of interface

specifications by computer manufacturers in order that their equipment

be placed on the Federal Supply Schedule. Agreements have been signed

now with the major mainframe manufacturers which allow the government

unilaterally to add foreign attachments to the systems leased from

each of these mainframe manufacturers. The manufacturers also agreed

to provide related technical information which has loosely been denoted

as interface specifications or interface standards. This particular

activity on the part of the government was intended to make data processing systems more competitive so that any user who wanted to upgrade

or expand his computer system could have a much greater choice of

suppliers. The benefactors of this would be the manufacturers of

independent peripherals or independent computer components.

One of the major problem areas in the computer field relates

to the acquisition of software. GSA has been interested in determining

whether it was feasible to use a single-purchaser concept for software

meaning that the government would procure a software package for use by

all Federal agencies. This interest on the part of the General Services

Administration was in large part generated as a result of a study of

June 30, 1971 by the General Accounting Office. This GAO report was

entitled "Acquisition and Use of Software Products for Automatic Data

Processing Systems in the Federal Government." It recommended that GSA

employ the single -purchaser concept and start to obtain non- restrictive

or license- free contractual arrangements for software with rentals based

on use: it asked GSA to consider buying outright software products that

would be widely used throughout the government, and to maintain an inventory of computer software. The Bureau of Standards was asked to

establish and maintain indices of computer programs and to do evaluations

of computer programs, as well as to expedite their promulgation of Federal

standards for computer languages and program documentation.

23
This particular set of recommendations was not really liked

by the independent software . companies because of the fluid state of

protection for software packages. This fluidity has been increased

by the recent Supreme Court decision on computer patents. That decision

found computer programs to be not patentable, based on a particular finding with respect to a particular program. The use of copyright and trade

marks as means of obtaining property rights to software are the remaining

property protection rights that are still available to software producers.

It is very obvious that there must be developed a more coherent policy

both for the sake of the customer as well as for the producer for protecting the software rights of producers and at the same time protecting

the customers for the software products.

It is interesting, even in line with the Supreme Court decision,

to review the role that patents played in software and to review the interests of software firms in the private sector for obtaining proprietary or

property rights for their software. The first patents for computer programs

were issued in 1965. As of about a year ago, some 126 patents on computer

programs had been issued: the majority of these had been issued since

1969. As of about a year ago, only one independent software producer

held two or more patents on software. That was Applied Data Research, Inc.

It is also interesting to note that five of the nine organizations holding

two or more patents could be classified as computer software users rather

than as producers of software. These were in particular Bell Telephone

Laboratories, Texas Instruments, Continental Oil, Kaiser, Inc., and the

Navy Department. The summary that was made a year ago showed that 69

of the patents issued were held by eight firms and one government agency.

At that time, only IBM, Honeywell and Burroughs as producers of computer

software held software patents. It appears then that not only is the

Federal government not quite sure of its property rights of software but

neither are the producers of software in the private sector. There is no question about the fact that professional relations during the procurement process will be improved as an understanding of the property

rights of software are more clearly delineated.

From the GSA study on procurement and use of proprietary software in use on September 30, 1971 by Federal agencies, the following re- sults were obtained. The number of software packages in use procured

by the government as proprietary software numbered 496. The number of

different types of packages was 279. It was determined that the number

of packages with more than one copy in use were only 62 and the number

of software packages with more than 10 copies in use were only three in

number. It was very obvious that the use of software packages as of that

survey was very small. The survey seemed to bear out the observable fact

that the vendors and the professional firms selling proprietary software

packages knew the individual government agency as the customer rather than

the Federal government as a single customer, and their market policies

appear to be based on this concept. In this regard, the major problem

facing the government seems to be the identifications of firm requirements for a particular software package upon which one can base an eco- nomic evaluation or price. As a general rule, the data processing re- quirements for any installation are considered unique and dynamic, and

24
agencies are justifiably reluctant to commit themselves to the use of a specific software package in view of what appears to be their constantly

changing requirements. GSA felt that there were many formidable obstacles

which would have to be overcome before procurement of proprietary software

packages for government -wide use would be feasible.

Some additional comments concerning the procurement of software

from professional firms or private sector companies would be that government

rights are not well defined in many software development contracts. There

is a need for policy guidance, say, from the Office of Management and Budget.

We note that DOD Legal Counsel has determined that computer software is

property. The implication of this property determination is still not

known. The effect, if any, of the DOD property determination on the free

use of DOD software by other government agencies should be clarified

by DOD policy rather than be left to individual determination. Any field

that has the amount of permissiveness in it as does the procurement of

proprietary software is bound to generate misconceptions and disagreements

between provider and seller, and between the government and the professional

firms providing services and products. It would be to all of our advantages

to clarify the role of proprietary software and the rights of both the buyer

and the seller.

The time and cost of the selection process within the Federal

government for computer systems which may include just hardware, just

software or both hardware and software is excessive for both the vendor

and the customer. One of the main objectives of government procurement

has been and still is the streamlining of the procurement process. Some

surveys, including the DOD Blue Ribbon Study of several years ago, show

that for more than 601 of Federal computer customers, the computer system

selection process takes from 18 months to six years. In this period of

time, an entire computer equipment generation may have come and gone. The

burdensomeness and cumbersomeness of this process to both the vendor and

the government is obvious . The five maj or techniques employed in computer

selection processes by the government as well as other large computer customers

are 1) evaluation of benchmark problems, 2) computer simulation, 3) the use of

published hardware and software evaulation reports , 4) mathematical modelling

and 5) the programming and execution of test problems.

Just last summer, the GSA established a Federal ADP Simulation

Center and delegated authority to the Air Force to operate the Center.

Under the interagency agreement involved, GSA assigned responsibility to

this Federal ADP Simulation Center for providing technical services and

assistance throughout the Federal government for simulation, analysis

and performance evaluation of ADP systems. The Simulation Center was

made the primary source of supply for Federal agencies for ADP simulation

and computer performance evaluation requirements : the Center was to provide these ADP services at less cost to the government. In addition, all

government contracts for simulation and performance evaluation systems

including those for software packages would be issued by the ADP Simulation

Center. The intent was to have the Federal ADP Simulation Center provide

centralized services for Federal agencies during procurement processing

25
for ADP systems. Whether or not the simulation services thus provided on

a centralized basis will expedite the selection process remains to be seen

and awaits a longer time of existence than the six months in which the

Federal ADP Simulation Center has been operating.

It is apparent to anyone who has been observing the computer

products and service marketplace that this is not yet a marketplace

which is rational. It does not provide proper documentation or con- sumer information to the customer, there is a relatively poor relationship between price and cost of products and services, and there is a general mis -use of traditional marketplace standards in the computer

marketplace.

Quite frankly, one of the major problems in the computer

marketplace is the soft market practices in software transactions. One

of these practices is the familiar dispersion of responsibility between

the private sector companies and the Federal agency customers. This

practice has been deemed essential for successful software production

since the beginning uses of computers. However, it does not seem to be

essential, and it does indeed effectively preclude any real assignment

of responsibility for quality of software products to the producer. My

feeling is that contracts based on cooperative efforts between buyer and

seller just do not lend themselves to protection of either customer or

seller.

A second reason for today's problems in the computer marketplace

is the lack of acceptable business procedures for estimating the extent

of the software package to be produced either in terms of the number of

instructions, the man-hours to produce, the time to run the complexity

of design and the like. Neither the buyer nor the seller of software

has devised such widely useful estimation procedures which are common

to most service areas. A real problem facing the Federal agencies as well as other computer customers is the lack of existence of product

performance or design specifications for software. Other than benchmark

test and simulations both of which still lack any widespread acceptance,

there is no uniformly useful market test for software. Individual Federal

agency customers left to their own devices have real difficulty evaluating

the delivered software soon enough to request modifications under the

terms of any covering grant or contract. As a result, we find a situation

where neither the buyer nor the seller is really satisfied with the result

of the procurement action. There is a looseness of terminology in defining

whether or not one is buying just a software package, just a piece of

hardware or whether one assumes that in buying a software package or piece

of hardware, one is really buying a service that will continue longer than

through the transaction of the initial procurement. The permissiveness

in this regard that is now tolerated by both the Federal agency customers

and the private sector seller is amazing.

In particular, when one looks at an application area such as management information systems, we see these generalities becoming specifics.

For example, most surveys of computer system users which have attempted to

measure satisfaction with the computer product or service have revealed

26
that management information systems are those from which least satisfaction

has resulted. There are many other development areas such as inventory

control, process control and scientific and engineering use where there

is widespread satisfaction with computer systems. This is also true in

special application areas, such as library retrieval or computerized

patient record routines for hospital use. In the management area where management information systems

that are computer based have become widespread and quite popular, the

problem seems to be equally divided between the buyer and the seller.

Most buyers hope that a good computer system will make a good manager.

The best that should be told by sellers is that a good computer system

can supply good information, the good use of which will make good

management possible. However, too many times the seller attempts to

make his point using the arguments and the desires of the buyer rather

than the realities that are manifested by his own product or service.

At the Bureau of Standards, we have just completed an index

of data management software packages. In this instance, general -purpose

data management software has been defined to be software which is application independent and which provides at least one of the basic data

handling functions of file definition, file creation, file maintenance,

query, retrieval and report generation. The index listed currently available packages, both proprietary and government -owned, and identified them

by name, developer and source and contained some descriptive material.

Even in this particular indexing effort, we discovered two problems of

major significance which are also encountered by buyer and seller. One

of these problems was the variation in the technical level of documentation made available by the supplier, and the other one was the disparity

encountered in the terminology used. Both of these problems relate really

to the lack of documentation standards and the lack of persistent customer

demand for good reliable consumer information.

Using this definition, some 154 data management software packages

were able to be identified. If one considers a selection from 154 products

with the complexity of a non- trivial computer program where the documentation

is insufficient, where there is no measure of performance supplied and where

there are no standards utilized either for documentation or for the quality

of the software generated, then one indeed has a situation which can guarantee

dissatisfaction of both buyer and seller.

I think, therefore, that the computer world of which management

information systems is a very important subset, there are some characteristics

which are not commonly found in the Federal government for other products

or services. One is that central management has been provided through

the Brooks Bill and is exercised by OMB, GSA and the Department of Commerce

through the National Bureau of Standards. Secondly, there is a selfcontained coherent set of procurement procedures which attempt to keep

pace with very rapidly advancing technology. Thirdly, computer marketplaces are ones where customers have been extremely permissive, have

demanded very little of the suppliers, and as a result, have essentially

generated an industry not grown on our business practices of cost/price
setting, on providing satisfactory maintenance and on having to determine

the precise service guarantee liabilities that they must assume or must

offer in working with customers. At the same time, there are very

few areas outside the computer world where the customers have insisted

on being such an integral part of the service or product production

cycle that the separation between customer and buyer becomes almost

impossible in many instances. This causes a very burdensome load on

the seller who wants to have a clearcut responsibility in this area. There does not appear to be solutions to all of these problems in the

near future although the problems are being eroded away be continual

efforts of these three central management agencies and of the major

users of the computer related services in the Federal government.

28
MANAGEMENT CONSULTING

Dr. William P. Sommers

President

Booz, Allen Applied Research

Bethesda, Maryland

ONE OF MY IMMEDIATE PROBLEMS IS TO DEFINE MANAGEMENT

CONSULTING. According to some figures we collected last year,

the amount of management consulting procured by the Federal

Government in 1971 amounted to approximately $1.5 billion.

This consisted of about $900 million in civil systems

work, such as in social services, labor, manpower development

and others, and about $600 million in technical and scientific

consulting services. Furthermore, on top of that Federal market,

the state and local governments purchased about $400 million in

management consulting services.

Management Consulting Defined

Management consulting is professional services but

excluding architectural and engineering services.

Management consulting, as defined by a firm such as

Booz, Allen and Hamilton, or the Association of Consulting

Management Engineers, would be as follows, and I will read you

a brief excerpt:

"Management consulting is the professional service performed by specially trained

and experienced persons in helping managers

identify and solve managerial and operational

problems of the various institutions of our

society, recommending practical solutions to

these problems and helping to implement them

when necessary."

I submit that while this definition fits management

consulting done for commercial industry, it does not fit

within the context of the work that is normally done for Federal,

state and local governments.

A Different Definition for Government Management Consulting

In terms of Federal, state and local governments,

management consulting is research and systems oriented. One of

our senior officers has estimated that about 90 percent of what

we management consultants do for the Federal Government is

29
research and systems oriented and not the "classical"

management consulting accomplished for industry. Industry

consulting is typically reorganization studies, personnel studies

and financial studies.

Services Performed by Management Consultants to Government

This morning we are talking about management consulting

in the Federal, state and local government context. These

services are: program evaluation studies in which a consultant

is called upon to evaluate costs, schedules, feasibility,

analysis of alternative choices and programs, program planning,

R§D planning, financial planning and systems engineering.

Management-information systems : falls into the

definition that I would use for management consulting in Federal,

state, and local governments. Economical and technology tradeoff studies, analytical studies, pure analytical studies, costbenefit studies, operations research, engineering studies,

technical assistance, counseling, training and Government

program- impl ementat ion support are part of the management

consulting business in the Federal, state and local government.

Management consulting covers a wide spectrum of

services

.

What I am going to do this morning is to offer

suggestions on how the Government could hire consultants. The

second topic pertains to suggestions on how the Government should

manage consulting services to get the best results, and third,

what, in fact, the Government should expect from a management

consultant in his dedication and performance.

As you all know the Government has a rather voluminous

set of procurement regulations for hiring consultants. These

regulations have become more voluminous over time, and have been

developed to guard against improper practices on the part of

either the Government or consultants serving the Government, and

also to fix liability and determine who did the work.

The procurement officials who administer the procurement regulations are major participants in this entire

procurement process.

I would like to pause at this point and point out that

there is no parallel in management consulting work done for

industry comparable to a procurement official.

The Procurement Process

Without passing judgment on that difference, the net

30
result of there not being that procurement official is rather

significant. For one thing it means that the Government must

act through a far more formal process, which puts an amount of

burden on the Government to execute some preliminary steps. In

industry the consultant participates in many of those preliminary

steps

.

THE GOVERNMENT PROCUREMENT PROCESS

This chart portrays the Government procurement process.

It is a rather formal process; in fact, you could say a rather

"formidable" process. It starts at Step No. 1 and continues

through Step No. 21. The shaded portion on the right of the

chart is the pre-contract portion, Steps 1 through 11. The

portion on the left is post -contract , what happens after the

contract is awarded.

The steps marked with a triangle are the crucial steps

in the process, the steps where problems most frequently arise

between the Government and the consultant who is either bidding

or performing work for the Government. We will talk about those

crucial steps.

Picking out the steps marked with the triangle during

the hiring process, these are the five most crucial steps

during the process of hiring a consultant. It places a burden

on the Government technical people at the outset.

Because the Government can usually only hire consultants

31
under a formal statement of work, the Government must typically

do the foil owing

1. ) It must develop an overall plan for the entire

program. The specific job to be procured is simply one part.

2. ) A statement of work for the consulting services

must be clearly stated by the Government.

3. ) The end product and results desired by the

Government must also be specified.

These are not easy tasks; in industrial management

consulting, the consultant is often brought in sooner and assists

in this process. This is one of the differences between

"classical" management consulting and that which we do in the

Government

.

Incidentally, it is interesting to note that some

Government agencies actually have hidden prohibitions against

hiring consultants under the term "management consulting." It

is interesting that in our agenda we should define this service

using the term "management consulting."

In the DOD, for example, any line item in the budget

calling for a management study gets such close scrutiny that

some of my friends in the Department of Defense have pointed out

that these studies have all but disappeared. That does not mean

they are not done; sometimes they are done under other names.

Sometimes they are done under that name, but these instances are

less prevalent than they used to be.

This means that the type of consulting that is so

commonplace in industry, which consists of providing top

management with counseling during the formative stages of the

problem, is much less common in the Federal Government. In my

judgment, the trend is toward less and less "classical"

management consulting in the Government.

This is unfortunate; it means that as parties in this

partnership we work increasingly against rigorous statements of

work

.

There are only a few cases in which the consultant, is

called in to do a Government job where it is a "stand alone"

job; in other words, that job has no relationship to other jobs.

The opposite is quite true; in most cases, the job the consultant

is called in to do is closely related to other assignments the

Government is already doing, either internally or externally or

through combination.

32
Often, in my experience, when the work done by a consultant is found later to be of unacceptable or limited

value, the cause of the problem is found to be a poorly

structured overall program in which the Government was unclear

as to what it really wanted from the entire program.

Unfortunately, the formality of the Government process demands

that the Government do its homework in this area extremely well

before the procurement is initiated.

Less Rigidly Structured Contracts Recommended

Implied in this statement is an opinion and a recommendation. The Government would be served much better if

it made greater use of less rigidly structured consulting

contracts which would permit the consultant to provide the full

range of his advice and services and which are often needed

during the formative process of developing the entire program

p 1 an

.

Avoid the "June Rush"

Program needs, that is, what is actually required by

the Government in the project being procured, should be

identified early, and by all means, the "June rush" should be

avo id ed

.

In our business, where we work primarily with the

Federal, state and local governments, the "June rush" seems to

be increasingly evident, where the bulk of procurements out of

some agencies occur between April and June. I think that leads

to unfortunate experiences on both sides. In our case, I have

seen a number of poorly conceived contracts result from hastily

drawn statements of work and hastily procured contracts.

Unfortunately, in the long run, only the results of

the work persist. People tend to forget how the work was

procured and under what circumstances. Even worse, resources

can be wasted and the wrong job can be done.

Allow Sufficient Time For Statement Of Work

Thus another recommendation is for the Government to

allow sufficient time to prepare a work statement. This means

sequencing the work so that upcoming needs can be identified

early. I will make another case for this point later.

One of the more serious problems that we see in our

work is the problem of getting a good statement of work. Under

the formality of the procurement regulations, the Government

increasingly needs to know what it is procuring so that it can

procure in a competitive way. It demands that clear, concise,

33
clearly-delineated statements of work be issued. That is not

an easy task.

The solution is simply: write better statements of

work. Write them so that a person of average intelligence

can clearly understand what is needed.

Features of a Good Statement of Work

The chart below lists some of the features in a good

statement of work.

FEATURES OF GOOD STATEMENTS OF WORK

(1) STATEMENTS OF WORK WRITTEN SO A PERSON OF AVERAGE

INTELLIGENCE CAN CLEARLY UNDERSTAND

(2) SETS CLEAR OBJECTIVES FOR THE JOB

(3) SETS SCOPE OF WORK THROUGH CONSTRAINTS OR LEVEL OF

EFFORT

(4) DESCRIBES CLEARLY THE PRODUCT/RESULTS DESIRED

(5) CLEARLY STATES THE EVALUATION FACTORS TO BE USED IN CONTRACTOR SELECTION

(6) DESCRIBES MEASURES OF PERFORMANCE BY WHICH CONTRACTOR WILL BE JUDGED

(7) STATES SKILLS/ SPECIALTIES REQUIRED

(8) SETS SCHEDULES/REQUIREMENTS GOVERNMENT IS WILLING

AND ABLE TO KEEP

If nothing else, this chart illustrates that there are

a lot of aspects to a statement of work. I have already

covered the first point.

The second point, setting clear objectives for the

job, really means trying to write down what is desired from

the assignment, not just a specification of how it should be

done, but what the end product is to be. The latter is more

important

.

The scope of work should be very clearly set, either

through defining carefully the constraints on the job to be

done or stating the level of effort. In some cases it is felt

to be more "competitive" to not specify scope. In my judgment

34
this leads to some of the worst work I nave seen done in the

name of management consulting. There should not be a guessing

game between consultant and Government. Something should be in

the RFP that clearly delineates the scope of work desired. The

products desired should be specified.

It is easy to say that in every case of management

consulting the end product is a final report. There should be

documentation on any job. More important, however, something

lasting is desired out of the job or the job is not sufficiently

important. This aspect needs to be specified.

The evaluation factors that are to be used in choosing

the contractor should be specified, as well as the measures of

performance expected of the contractor. This is much harder to

do and is typically not done as well in Government procurements.

The two points on the chart, 5 and 6, are related, but

in my assessment much less emphasis and attention is given to

Point No. 6.

The Government should feel free to state the skills

and specialties required. In my judgment the Government is

buying a team of manpower. The Government has every right to

specify what they want represented in terms of skills and

specialties on that team.

Differences Between Grants and Contracts

The Government procures work under two entirely

different approaches. The Government procures some

professional services under grants, other services under

contract. Increasingly there is a marked difference between

the way grants and contracts are handled.

I participated last week in a discussion at NIH in

which this point was being studied. I do not profess for a moment to speak for NIH, but as I perceived their study program,

they are looking at the sharp contrast between the grant

program, which is a somewhat loosely managed program and their

contracts program which they feel free to specify very clearly

what end products they want.

They want to go toward directed research in NIH,

which means more toward specifying what they want out of grant

programs. This is going to be an increasing problem in

Government

.

The contract program has become more rigid in

specifying what is needed; the grant program has stayed

relatively loose under the impression that grants should be

35
for scientific and basic research and therefore should be very

loosely structured.

The contrast is becoming great, and at least one

agency, NIH, appears to have come to the conclusion that they

have to do something.

Finally, the Government needs to set schedules and

requirements that the Government itself is willing and able to

keep

.

Let us go back over just a few of these points and

emphasize them. In speaking for myself as a contractor we do

want measurable results from our work, for one very simple

reason: we want to be measured.

Measures Are Needed

In the case of our firm, we are solely in the

consulting business, either for Government or for industry.

Our success in the long run depends entirely on what people

perceive our value to be. It is frustrating to be a contractor

who really wants to perform well to be performing under a contract for which there is either no end in sight, no urgency

attached to it, or no definable product specified. When this

kind of consulting contract ends, neither the client nor the

consultant will be able to tell what was really accomplished.

That is unfortunate, because we need to work on jobs

where there are definable end results and where our benefit can

be measured. It may be good or bad; the product may be

measured and found wanting, however, this is still superior to

working on a job for which there is no end in sight.

The measures by which bidders can be chosen have been

mentioned earlier as a problem. I also mentioned that the

performance measures of a contractor should be specified.

The reasons for this are very simple and fairly

obvious. The measures of performance that are applied to a consultant very often dictate the priorities of the job. To the

extent that the Government, as the purchaser of the service, can

clearly delineate its priorities, this measurement is for the

benefit of both parties.

Recommendation: Early Participation by the Contractor

Another recommendation is to encourage early

participation by the contractor. You always have the problem in

the procurement process of situations in which getting to know

the contractor can lead to favoritism.

36
In my judgment, one of the areas of Government

procurement that most needs emphasis and corrective action is

pre- screening of the consultant prior to the competition. The

Government has every right to get what it asks for. Tough

-pr e-qual if icat ion efforts are appropriate. The Government should

become acquainted with a potential contractor and his past work

in industry.

Contrary to what some Government procurement people may

believe, most competent contractors are not looking for more

chances to submit proposals. I know we are not. I think a lot

of evil is committed in the name of competition. I will give

you two examples.

Our firm participated in a competition last year in

which the Commerce Department did a good job of advertising the

procurement, however, it was not a very clear statement of work.

As a result, 42 firms submitted proposals on a $45,000 contract.

The procurement man seemed delighted. At an estimated

cost of $ 1 , 000- $ 2 , 000 per proposal, most of which is reimbursable

under a system in which the Government reimburses the cost of

proposals, this was a rather expensive competition. The

Government may have paid as much as $90,000 for the competition

to be run in allowable overhead.

Contrast this to a competition in which our firm

participated. The Department of Transportation knew two years

in advance that they were going to be procuring systems

management services in the urban mass transit field. They

picked out the nine areas in which they wanted to hire

consultants and contractors. They then ran a pre-select ion

competition in which 400 firms submitted qualifications. They

were very detailed qualifications because the qualifications

were pre-demanded by the Government.

The Government was very hard-nosed. A lot of firms

complained. It took a lot of work to submit that qualification.

In our case it took as much work as submitting a proposal.

In each of the nine areas, the Government qualified

no more than ten firms. The RFP's were later issued and in

every case they received almost as many bids as they had

qualified firms. I do not think any firms that were preselected out or who lost the competition felt that they had

been dealt with frivolously. They had been dealt with rather

carefully, and I think they appreciated it. I think the

Government got greater value as a result of that competition

than the one involving the Commerce Department.

37
Value and Price Should Be Equated

The other real problem in Government procurement is

the problem of value versus price. This is one of the most

distressing trends in Government and it has been growing. This

trend is to hire consultants more and more on the basis of

price of the services offered rather than for value.

In many cases the Government without saying so is

actually running a two-step procurement process. This is a process in which a number of firms are found to be technically

qualified and the award is made to the low bidder. This is not,

except in rare cases, in the best interests of the Government.

A Commission on Government Procurement, that just closed out its

work, has released their report and this happens to be one of

their recommendations.

Their recommendation is to reintroduce some flexibility

into this aspect of hiring. If we think about how the

Government procurement process has gone in the last several

years, we know that it is increasingly difficult to justify

awarding to a firm other than the low bidder.

The reasons for this are simple. First, it is hard

to write this reason into the file. The GAO and a Chief of

Procurement are always going to read the file. The toughest

thing for a procurement man to write is a memo that says, "I

awarded it to the technically first company; they were not

lowest in price but they gave the greatest value." Value is

hard to define. It is easier to define price. So price is

increasingly the determining factor.

I think there is a second reason for this phenomena.

In too many cases the Government technical man has let his

position in the procurement process erode and has all but

relinquished to the procurement man his right to make the final

selection of the consultant.

This has come about because in some cases the

technical people did not really know what they wanted, or

were unclear in stating their needs.

If the trend toward price auctions continues, the

result can be nothing less than inferior work in an increasing

number of cases. I contrast this to the whole grant process,

where the technical man makes the only determination of who

gets the grant. In the case of many agencies, more money flows

out of grants than flows out in contract form.

In my NIH example the grant program amounted to

$900 million contrasted to $100 million in their contract

program. That is an interesting dichotomy.

38
Government Must Monitor Work in Progress

The Government's job does not end when the contract

is awarded. We all know that, but I think it is important to

emphasize it. Consistently the best work is produced when a well-informed Government monitor maintains a full awareness

and personal involvement in the work. It should be fairly

obvious why, but let me list a few of the reasons why.

If the work is really consulting, and is funded under

R§D, and is technical and professional services, then it

cannot be fully specified months in advance of its execution.

The study direction will likely be refocused as results are

achieved. The information that is developed during the course

of the work may be usable as it arises. If a Government monitor

is working closely with that contractor, it will be used. That

has benefit in that it reinforces the contractor's approach,

it builds his team enthusiasm, and it is a "people" business

and the people do react to seeing the results used.

The Government working closely with the consultant

also helps assure that the wrong study is not done. Lessons

learned early might redirect the study. Since the work is being

done for a useful reason the earlier the results are used the

better

.

I would like to give you one quote which I have found

particularly distressing. It came out of the recent

Congressional hearings. It was a quote from a high-level

Department of Defense official, who said:

"The alternative to using federal

contract research centers is to utilize

other private contractors. This is

likely to result in lower quality work

and will require greater Government staff

resources to negotiate, award and supervise the technical efforts."

I submit that to get the best from any professional

consultant, whether he be part of an FCRC or a company, is to

work with that consultant and manage him. Whether he is a part of a Federal Contract Research Center or a company,

Government and taxpayers' resources are being used and it is

less than honest on the part of Government not to manage those

resources

.

The other point is that the Government has to

deliver the data and information promised, and I maintain the

team approach.

39
Now allow me to go to the last point in my presentation.

What Should the Government Expect from a Contractor ?

In the foregoing two sections of my presentation I have

emphasized what the Government has to do. What should the

Government expect and demand from a management consultant, or

its professional services firm?

Professional Services

Professional services means thorough fact -gather ing

,

pertinent, in some cases exhaustive analyses, and a very clear

articulation of the results.

Finally, in giving professional services, the

Government should expect that it is getting those services

without bias; that it is hiring a consultant who does not have

a vested interest.

Capable Personnel

The Government should expect capable personnel. I think

the Government is wisely putting greater emphasis on this. They

should expect the contractor to deliver the quality of personnel

he has promised. This may not mean the precise people, but it

certainly should mean personnel of the same caliber.

I would also like to point out that we cannot overlook

that the Government is sometimes dazzled by the credentials of a single person. Unless it is a one-man job, the Government is

buying a team, and it is the team that does the work. It is that

teamwork that in fact produces the best work.

Clear Presentation of Results

The Government should expect a clear presentation of

the results, whether they are presented orally, in writing, in a computer program or in documentation of that program. I am

bothered when I go back and look at work that was done several

years earlier and find that the result or the product is not

sufficiently clear.

Sensitivity to the Client Involvement

The Government should expect a sensitive treatment of

the client's needs. The consultant has to understand the

problems being encountered by the Government. The procurement

process can take as long as a year. The circumstances within the

40
Government can change. The consultant who does not recognize

this and does not tailor his results to those changed conditions

is not doing his job very well.

Strict Control of Results

Finally, the Government should expect strict control

of the results and no unauthorized disclosure. In our firm we

follow the policy that even if the work is made public by the

Government, the Government still has the only right to release

the report. We are not at all free to distribute it.

More importantly, the consultant should never discuss

his work without Government approval.

In conclusion, there is considerable room for improvement in the selection of consulting services and their use by

the Government. I firmly believe that consulting services can

be of great value to the Government in its administrative and

substantive programs. With diligent professional work on both

sides of the partnership, the job can be done very well. In

many, many cases it is being done very well.

41
ARCHITECTURE AND ENGINEERING

Commander Jerome R. Dunn

Staff Officer

Office of the Director of Construction Operations

Office of the Secretary of Defense (Installations § Logistics)

Washington, D.C.

I CANNOT HELP BUT PREFACE MY REMARKS BY CONTRASTING

the situation which exists on the architect-engineering side of

professional services, with some problems presented here.

There are innumerable reasons for this. One of the

reasons is that architect -engineering services have been

procured by the Government for a very long period of time. This

traditional means has developed and recently been codified, so that we do not face all of the same problems.

Let me discuss some of the problem areas in the DOD

which have been areas of controversy with the private sector.

In-House Versus Staff Work

The first of these is the concept of in-house staff

versus work done with private contractors. This is an area

which has been one of increasing interest in the Congress in the

last two to three years. It has even been the subject of some

studies by the General Accounting Office. It has always been a matter of great concern to us in the Office of the Secretary of

Defense and to the individual agencies in the Department of

Defense.

Basically, within the last two years, we have

developed within the Department of Defense a clear statement

concerning in-house staffing to answer questions of what work is

done in-house and what work is done by contract. Our in-house

staff levels are based upon our aggregate, overall facilities

acquisition and management requirements. We must have sufficient

resources to manage these essential functions, and I emphasize

"manage .

This is true principally because we are charged with

managing and maintaining a very large inventory of facilities.

We have a large continuing program for acquisition of new

facilities. Therefore we must look at this job as a system

rather than as individual discrete work functions.

We place primary dependence upon the private sector

to do our A£E services. The principal amounts of these are

42
designs for new construction, but there are innumerable other

types of services which we also procure; studies, concepts and

other architect-engineering areas of expertise.

Professionalism Must Be Maintained In-House

Over 80 percent of the dollar value of new construction

design is done by the private sector. That percentage which is

done in-house is done deliberately with the goal of maintaining

the professionalism of our own in-house staff. We feel this is

important because we must have active involvement in the actual

practice of the profession in order to recruit and retain

competent and competitive personnel within the Department of

Defense. It also assures that the Government professionals who

do the slating and selecting, actual negotiation of the contracts,

management and administration, and evaluation of contract performance are truly professionals who are on top of the profession, and not merely managers with some prior technical background.

We also require this professionalism to carry over into

other areas. We require it in the planning and programming of

our new construction requirements, management of the construction,

the actual construction execution, and in the management and

maintenance of the large inventory of facilities which we have.

There is one other area in the traditional A$E expertise

for which we do not place primary dependence upon the private

sector. This is in the so-called Title II, or "Clerk of the

Work" inspection.

This function is routinely accomplished by the in-house

forces of our two primary construction agencies, the Army Corps

of Engineers and the Naval Facilities Engineering Command. We

do this for a number of reasons: First, because we find it the

most cost-effective; second, because we double up these

personnel in performing a construction contract administration

function. We cannot effectively separate one function from the

other

.

I realize that in talking to representatives of the

private sector it is very controversial to say that it is more

cost-effective to do something in-house than by use of contract.

I assure you this is an area which has had intense study, and

has been a subject of great concern to some of the Congressional

Committees and to the General Accounting Office. We have gone

through this in some detail.

Since we do procure some 80 percent of our new design,

or a major portion of our A§E services from the private sector

through contract, we are very concerned with the procedures and

the Federal regulations that apply. Many of you know that the

43
procedures for procurement of A§E services were recently

codified by Public Law 92-582, more commonly referred to as the Brooks Bill, which sets forth the policies of the Federal

Government for procurement of architect -engineer ing services.

The Brooks Bill confirms, at least from the Department

of Defense point of view, our long-standing practice of selecting

architect-engineers on the basis of purely technical competence

for the specific job and not on the basis of price proposals.

I would certainly agree with Mr. Summers' comment on the

problems that would evolve if we did become dependent upon price

proposal s . Public Announcement of Contracted Services Forthcoming

There is one other aspect of the Brooks Bill which the

Department of Defense is implementing, even though the Brooks

Bill per se does not apply to us directly. However, in keeping

with the statement of Federal policy enunciated in the Bill, we

are adopting a procedure for public announcement of architectengineering services.

We have been constrained from doing this in the past,

particularly for new construction designs, because of the very

close relationships between the design services and the future

Federal budget. The Office of Management and Budget has

constrained us from making these announcements because it would

disclose elements of the President's budget. We are very pleased

that we will be able to make public announcements. We are

proceeding with regulations which will allow public announcements

One other area which is sometimes troublesome to the

architect-engineering community, and I guess is one of these

"buzz" words that alerts people and makes them sit up in

certain circles in the architect-engineering community, is the

word "turnkey."

"Turnkey" Procedures to Continue

We do not procure all of our so-called architectengineering requirements directly through A§E contracts. We

have and will continue to procure some A§E services, which are

directly related to construction, through the so-called turnkey

procedures. This can be either a one-step or two-step

procurement procedure. We do so only in selected circumstances.

We have recently completed a very extensive study of these

instances to establish criteria which would clearly identify

those cases where this would be the preferred route. In essence

what we are saying is that when we are buying a product rather

than a design, when a design is either incorporated in that

product or it is a standard design, it makes sense to logically

44
procure the construction with the design being incident

thereto

.

We do not foresee any great problems in the architectengineering area. We have been very fortunate to recently

have had some of these areas of controversy removed by the

Brooks Bill. I recognize that there is still controversy

remaining in this area. The Commission on Government

Procurement report has a majority recommendation dealing with

architect-engineering procurement which would lead us more

toward the procedures now being followed in other professional

services' areas. But for the moment, with the passage of the

Brooks Bill, this does not confront us directly.

Communication: A Recognized Problem

We do feel that there are problems, as always, in

communicating with the private sector. We have made great

efforts to resolve those problems. One of the biggest pertains

to what we do in-house and what we do by contract. We have made

great strides in the last two years in meeting with the various

professional societies of architects and engineers, such as the

Consulting Engineers Council, National Society of Architects

and Engineers, AIA and others so that we do understand each

other's problems. This is the key to solving whatever problems

remain before us in the architect-engineering field.

45
OPERATING LEVEL PROBLEMS IN PROCUREMENT

Dr. Walter Edward Cushen

Chief

Technical Analysis Division

National Bureau of Standards

Washington, D.C.

I AM GOING TO CONCENTRATE ON MY FAVORITE PROFESSION,

operations research. Operations research is described in the

very broad sense of the word, to include systems analysis,

management consulting and related activities.

I am going to concentrate on problem areas. I will

not pay much attention to the many things that are done. I am

going to concentrate on things that our Division has discovered

as we have worked among the second echelons of Government

agencies. This will be, in a sense, a "worm's eye" view of

what is going on inside the system that we are discussing.

Our Division tends to live at the front end of

problems. That is, we tend to be there when somebody thinks

of a northeast corridor transportation project; we tend to be

there whenever somebody in HUD says: "Let us have a management

information system project."

We tend to be there when the Department of Justice

says: "What will we do- on an impacted cities program, if we

have one?"

$500 Million of Untapped Business

We tend to associate with the Government bureaucrats

in the salary and grade range of GS-13 to GS-17. We do not

tend to associate with the political appointees at the

Assistant Secretary level and above. In a way this viewpoint

comes from the operating level. An awful lot of the work is

done at this level that people want in response to exercised

political choices.

Within these areas I would estimate that there is

$500 million worth of business in the systems profession that

is not now being tapped by most of you.

Twenty-Two Trouble Spots

I am going to list some 22 troublesome spots that we

have found and the results of a survey. Rest assured that there

is an altered tone within the Government these days. The Nixon

46
Administration is beginning to filter its wishes down to

middle level bureaucrats who have to do the job. Consequently

you will continue to see something of an altered tone. In the

future you will not notice a feeling that a problem exists and

therefore Government must solve it by building a big empire.

Must Determine That A Systems Job Needs To Be Done

First of all the basic problem we see when we attempt

to assist somebody is to be sure a systems job really needs to

be done. In many cases, he is not so sure it is going to do

him any good even if he gets an answer to the question. Therefore a sales job needs to be done at the front end. It needs

to be done, not with PERT charts, not with beautiful diagrams,

not with "beautiful dances," and not with the beautiful brochures

that tend to come out, but rather, it has to address the question

what good will it do if I provide a good system job?

A credibility gap exists in a large number of the

civil Government agencies, a credibility gap concerning the fact

that the systems approach is going to really do them some good,

that it really has to be part of the process. There is still

residual doubt.

Problem No. 1; Early Problem Specification Difficult

When our good friend from Booz, Allen asks: "Fellows,

why don't you tell me clearly what problem it is that you want

to have solved?"

The answer to that question is: "We cannot describe

the problem. It is far too tender. It is in a developmental

stage, and I honestly cannot tell you what I want.

"What I can tell you is that I have an idea what it

is I want done. I know that I need your assistance, but I cannot shove that through my procurement channels. They insist

that I have something clearly stated. About the best I can do

is to say that I want a variety of services. Today I am going

to need this, tomorrow I am going to need that, I do not know

what I am going to need, but I am going to need your technical

skills. I know that I can use them, but I cannot really

define my problem clearly enough for you to be able to respond."

A good example is the new concept of public

technology. "Let us get technology down where the cities can

use it." If you are designing a garbage collection route,

like Stonybrook for the City of New York, the basic questions

are: how many cities are going to use it; what is the hang-up

in the process; why is it that somebody else has not invented

the thing; how do we aggregate the market; and how do we make

it profitable?

47
I really cannot tell you which "hunk" of the problem

I want you to work on. I know the problem I am trying to

address. I simply cannot, and will not, say exactly what it

is that I need, because I do not know at that stage of the

game. I would like to have the management consultant in at the

early part of the process, and I do not know how to do that.

Problem No. 2: Advocacy Process Demands Many Answers

Whenever you are doing these types of studies you are

purely and simply part of an advocacy process. A man who

starts a northeast corridor transportation project, or a man

who tries to get the Postal Service mechanized, or a man who

tries to install an evaluation system in the Department of

Health, Education, and Welfare, is flying uphill. He is trying

to begin a project which he believes is in the best interests

of Government. He is an entrepreneur, and he is trying to

institute change.

this process. There are

Therefore, the guy who is

manager is part of his

The Government manager knows. He has heard many

sales speeches about the systems approach, and he does not

want to hear any more. The concept is acknowledged. He

requires somebody to move rapidly, along with him. If this

afternoon is the day on which the Director holds the program

review, the answer has to be there then, not the next day. He

does not know when that program review is going to be, but he

needs you then. He does not need you otherwise.

He has small amounts of money. Because he is an

entrepreneur and an advocate trying to get something new done,

he is living off a pilot project money himself. He cannot

properly reimburse you for the services that he has asked you

to .provide

.

You have to work with the system. One of our

experiences has been that when we thought we were starting

somebody to solve his problem we found ourselves going off on

a different track. We became part of the problem rather than

part of the solution.

A systems study has to go through successive stages

of approval. That is to say, if you do a systems study for

a man in an agency, you are doing it for a man who has to

convince his boss, who, in turn, has to convince his boss, who,

There are adversaries to

inertias that he has to overcome,

helping that particular Government

adversary process.

48
in turn, has to convince his boss. You are doing it for a man

who is trying to cream off a piece of the action that some other

Government agency seriously coveted and is going to stand in his

way

.

In a sense, a systems study has to answer a multitude

of questions, not just the one that was written down as being

the task that had to be done. The study has to pass the "acid

test" all the way.

Problem No. 3: Changes in Personnel Create Another Problem

People who start projects in Government tend to be new

themselves. That is, typically a guy who comes in and starts

a northeast corridor transportation project has never been in

Government before. A new office is created, and the

Administrative Officer for that organization is new. Like as

not, the technical man is going to describe exactly what it is

he wants to have done. He wants to have people studying modal

split models, and he knows there are 100 of them. He would like

to have all 100 of them checked out to see whether any of them

are good, and if not, how they can be modified to make them

work. If they cannot be modified he will want to try and

develop new ones.

However, the technical manager of the problem very

frequently begins with absolutely no orientation to the fact

that whenever he lets out a contract, he has to tell the business

man that he is going to let out a contract. Consequently, we

have gone through sequences in which we have worked directly for

a technical man who has informed our Budget Officer that we are

being authorized to do a job but has forgotten to tell his own

Budget Officer that he had authorized the work to be done.

We are dealing with a lot of changeover in personnel.

We are dealing with people who have established a good system

for operating in terms of what used to be. When we come through

and say:

"How about trying a basic ordering agreement?" the

procurement channels say: "What on earth is a basic ordering

agreement? We never heard of it."

Each agency behaves in a totally different fashion.

The word-of -mouth passes sometimes effectively, sometimes not

very effectively. It is very difficult to set up a new

procurement process in order to get things done, and it is very

easy to say no.

There are always new problems that occur. An

entrepreneur in Government has to have his contract out and the

49
answer in real quickly. His plan has to fit within his timeframe . Increasingly, the Government man is less interested in

paying for basic research. He knows that somebody ought to

study why the grass grows green. However, he does not care

about this research nor is he going to pay for it or pay any

attention to it. The thing that he needs is something that will

help his particular position in moving things along.

Problem No. 4: A residual Mistrust of Free Enterprise System

Among a large number of operators in Government, there

is a residual mistrust of the free enterprise system. They

believe that businessmen are out solely for a profit and could

not care less about whether Government is advancing its

interest s

.

You know that is all false. I know that is false. The

fact of the matter is that this perception still maintains and

perpetuates itself in a number of places.

As an illustration let us look at the Government

manager who starts an entrepreneurial project. The word about

this project goes out real fast and within a week he is besieged

by telephone calls from people who want to come in and peddle

him something. At this stage of the game, he does not know

exactly what he wants you to do, but out of politeness he has to

stay and listen. This puts him behind schedule. By the time he

has briefed 25 industrial representatives about what he wants

done he has learned a lot in the process, but he has wasted a lot of time. He may be just plain "turned off" perceptually at

that stage of the game.

Problem No. 5: Government Agencies Believe Inside Contracts Better

Most Government agencies believe, and I will confirm

that it is true, that it is easier to contract inside of

Government than it is to give a commercial contract. The

imbalance in the costing rules that used to exist are slowly

beginning to disappear. Government people, when they price out

their own service, are increasingly including more of the

components of the indirect overheads than they have in the past.

They do not yet include the amortization of buildings, grounds

and similar items so some unfairness still exists.

It is also easier to do an in-house procurement for

the following reasons.

If you let out an RFP, there is a "rule of thumb"

which says that it is going to cost the Government $50,000 to

50
evaluate those proposals. The $50,000 out-of-pocket cost to

evaluate the proposal is not nearly so severe as the opportunity

cost incurred should the people in Government who have to

evaluate those proposals write the justification for how come

they came to that particular conclusion, and enter the thing into

the system.

Problem No. 6: Disagreement Over Contract Control

The Government manager believes that he is entitled

to a greater degree of control over the contractor and the

contractor's responsiveness than the contractor thinks ought to

be exercised

.

Problem No. 7: Information on Organization and Procurement Lacking

Most people do not know where to go for what. That is

to say, you have your representatives out all over the

Government, trying to find out where the money is, trying to

find which "vacuum cleaner connection" will suck the money out

of the pockets of the Government agent in order to do your work.

However, there is no systematic presentation. There

is no blanket presentation of what Government agencies really

are preparing to procure. At some of our earlier conferences

we tried to advertise that notion. Tell a Government agency:

"We are going to invite anybody who wants to come. You tell

them what it is you want to buy, and the right guys will buttonhole you after you tell them."

However, the fact is that partly out of the security

of the President's budget, and partly out of just not quite

knowing what they can pull off, Government agencies tend not to

be able to make a sensible presentation as to what they are

prepared to procure in the following year or years.

In addition, Government agencies really do not have a feel for what other Government agencies are doing in the

systems business. The algorithms for routing fire trucks,

garbage trucks, postmen and so on have been invented at least

100 times, almost always starting from scratch.

Problem No. 8: Decentralization Leads to Unclear Objectives and

Confus ion

The Government is decentralized. There are 100 agencies

of Government and an Assistant Secretary, in part, is only

partly responsive to his Cabinet level Secretary. A Bureau Chief

is only partly responsive to his Assistant Secretary. A

Division Chief is only partly responsive to his Bureau Chief.

51
Each person tends to be his own decentralized "king."

When a contract goes through, all of these various people must

do business with each other. One of the laments that we hear

typically comes from a large aerospace firm that says:

"Hey fellows: until you have a good

organizational pattern, and until everybody

follows the boss's rules, and until everybody has clearly specified objectives and

timetables, we cannot really help you an

awful lot."

The fact is, nobody is boss. Nobody follows the rules.

Nobody has clear objectives, nobody wants clear objectives. The

name of the game is: how on earth can you get a systems approach

being used by a Government in which this situation exists?

Government is in fact decentralized. You can make your

deal with the technical man in NIH as to what it is you are going

to do, and you can make your deal with the administrative guy in

NIH as to what it is you are going to do, but a GS-7 in the

Division of Research Grants is the character who classifies your

project and sends it to its destination. By a single defect in

judgment, he can kill the project because he sends it to the

wrong addressee, and it enters the system twice.

Problem No. 9: Changing Goals

There is the problem of changing goals. When the RANN

program was initiated in the National Science Foundation, it

started with one set of goals, however, lessons it learned

caused it to move in a somewhat different direction.

For instance: right now one of the primary themes in

the RANN apparatus is the concept of research utilization, in

which people are saying:

"I want to know now who on earth is going

to use this result. I would like to have a strategy for how you are going to get the thing

utilized, or pass it to somebody who will get

it ut i 1 i zed .

So all of these goal changes tend to impinge on the

process. If you are not there, you do not know that the goal is

changing. In fact, most people do not know the goal has changed

until it has already changed and somebody says:

"I told you before, you have to have a research utilization paragraph in this

proposal; now you send it back and put the

thing in."
Problem No. 10: 0MB Tends To Be One Of The Targets Within

Government

Government agencies do not like 0MB. A fair proportion

of the project work that they do is to try to convince 0MB that

what they said was true in the first place. A great deal of

budget justification effort is caused by this problem.

Problem No. 11: Questions of Equity vs. Efficiency

People are beginning to get interested in questions of

equity more than they are in questions of efficiency. Questions,

which ask who on earth gets the benefits out of this thing, how

will this help the inner-city blacks, are coming more to the

fore than they used to.

Problem No. 12: GAP Must Be Satisfied

GAO audits represent one of the safety mechanisms

inside of Government and a Government man very quickly learns

that if he does not satisfy GAO he is in very deep trouble

indeed. You will very quickly see his mood changing the first

time he has gone through a GAO audit and has been drawn up short

for doing something that sounds a little bit on the suspicious

side.

Problem No. 13: Oversell Has Created Problems

We are a victim of oversell, particularly with respect

to systems, and particularly with respect to computers.

Problem No. 14: There Is No Common Language

When I advertise for a systems approach to be made I often get inundated with people who want to deliver the optimum

computer formula for getting my systems study done. So no

definitions and no common language create a real problem.

Problem No. 15: Basic Research in Disrepute

There is an increasing disrespect for the notion that

Government must pay for and subsidize basic research. This is

beginning to disappear from the lexicon. It still has strong

advocates in some grant-giving agencies, but among the people

that we tend to service, who are trying to get applied type

problems done, there is literally no point in suggesting to

them that they ought to be doing some pure or basic research.

53
Problem No. 16: Real Objective Is People to do the Work

For many practical purposes, an entrepreneur in

Government would like to buy staff to make up for the slots that

he has lost. That is to say, he has been told he cannot have

people; the work still needs to be done, and he would like to

hire somebody to come in and relieve him of the burden. He has

to invent ways to cheat the system in order to say:

"I want a particular product so that I can get somebody in here to work for me."

Problem No. 17: No Capability to Use Analytic Answers

Most agencies pass out so many contracts that when the

results come back there is nobody there who can interpret and

translate them into the administrative apparatus. There is in

fact an excessively thin capability inside of Government to be

able to use, on the average, your large analytic answers. If

there is somebody who understands the analytics, he does not

understand the nature of the political process of which he is

a part. If he is a part of the political process, he does not

want the analytic answers.

We once did a job for the Undersecretary of Commerce

in the last days of the Johnson Administration. His specification to me was

"I want to have a good systems study done,

but don't you dare bring in an analytic formula.

I do not want to see one word of mathematics in

that report. I am a lawyer, I do not feel

comfortable with mathematics, and since I am

going to have to use it in my own adversary

process, I do not want to be encumbered with

what could turn out to be a critical defect."

Problem No. 18: No Lessons Learned from Experience

Contracts are let and people do not seem to learn.

Should we let out ten contracts to say how do we deliver better

health service to the nation? The reports come in, they get

used in some manner, but nobody looks at them to say: what is

the lesson learned from this exercise?

Problem No. 19: The A-76 Privilege A Hiding Place

OMB Circular A-76 provides a very nice hiding place

for people who do not want to go commercial. Paragraph 4,

Subparagraph (C) says:

54
"This A-76 Circular does not apply to

managerial advisory services such as those

normally provided by general counsel, management organizations staff or a systems

analysis unit."

This means that somebody who would prefer not to go

commercial has, in at least the latest revision of A-76, the

perfect justification for not doing so. There are a lot of

people who would prefer to do the job inside of Government

rather than go outside for the work.

Problem No. 20: Mission Consistency Too Narrowly Defined

The next point deals with mission consistency. Unless

something is totally consistent with the mission of the group

that is being discussed, they are not going to get any money

for that group. This Conference is judged not to be sufficiently consistent with the purpose of my Technical Analysis

Division to warrant the use of Federal funds.

Providing switchboard service to make it possible for

people to talk together to help solve problems is regarded as sufficiently over the edge of that which is uniquely tied to

my mission. Because of this it does not get done.

Problem No. 21: No Assessment of Opportunities In Consulting

Within the Department of Commerce there is no person

who spends full time doing the assessment of the business

opportunities in the management consulting field. It is tied in

with some other unit. There are industry specialists for many

different kinds of industries but not one in the specialties

that we are talking about today.

Problem No. 22: Inadequate Start-Up Preparation

Finally we see that there is inadequate preparation

for major start-ups. The nationwide five-city test program

that said; "What do we have to do in order to hire the

hard-core unemployed?" was literally designed over a weekend.

It was put into operation, advertised over television when in

fact, the detailed planning for the concept was not done early

in the game.

We are working with a complimentarity of purpose and

an Administration must get early results, early visibility and

get things moving. This creates the inevitable complication

of trying to do something with a staff that does not exist and

has to be pulled in from the boondocks in order to get the

program underway.

55
Why Did You Choose TAD: The Results of a Survey

I will close with a report on a survey that my own

Division did of its own services. We have had the good fortune

of enjoying an increasing income from sponsors in Government

agencies to do systems work.

We were recently asked: "Hey fellows: aren't you

really competitive with the outside world?"

Our answer was: "We do not think so. We think what

we are doing is getting in where that very thin film is and

opening up the market potential for people who do not now enjoy

that particular market potential."

We commissioned a survey to be made of our sponsors and

said: "How come you picked us? We are an in-house group."

The answers came back as follows:

38 percent of the time sponsors said: "I did it

inside of Government because it was related to a policy-making question and I do not want to go

outside for that."

In 20 percent of the cases, the choice was motivated

by the feeling within the agency that they were still

in the problem-definition phase and did not know

what to ask for if they did want to go outside.

In 15 percent of the projects, we were hired because

we had "a unique skill."

In 12.5 percent of the cases, the time excuse was

used. That is to say: "I cannot get the money

out before the end of the fiscal year, and I have

to get the thing started."

In 11 percent of the cases, the educational excuse

was used. "This group already knows my problem, and

I cannot afford to spend time educating somebody

else in the nature of the problem."

The other 3 percent were miscellaneous causes.

What I have tried to do is to list, from an insider's

point of view, some of the perceptions and some of the activities

that I see going on which are different from the organization

charts that you see.

56
PANEL DISCUSSION, QUESTIONS, AND COMMENTS

PANEL ONE: DEVELOPMENT OF THE PROBLEM

QUESTION - ENTIRE PANEL: "Is discussion of

technical effort between contractor and Government technical

personnel before procurement is released a good or a bad

practice?"

DR. CUSHEN: Let me talk from the point of view of

one who tries to design a program.

I would like to have all the inputs that I can get.

I appreciate the fact that this gives privileged access and

competitive advantage. Nonetheless, I would dearly treasure

an ability to get program design information at the beginning.

There is really no reason why we should not have, in

the civil sector of Government, the analog of a technical

representative who can come in and assist a Government agency

to design its programs.

DR. DAVIS: In the abstract it is a good practice,

and a practice that is almost impossible to invoke. It is not

invoked in industry. You are just as likely, through not

being able to get a biased input from the people that you

contact yourself as you are if you produce your own bias in

your contract.

It is also a measurable amount of time in the

procurement process, and does add a measurable amount of time

to the selection process. I think it is a practice that is

very difficult to do in an effective way, although abstractly,

nobody could be against it.

COMMANDER DUNN: It does not really apply to our

area, because we do not generally select architect-engineers

by RFP process. The selection is made without submission of

proposals by the prospective firms. It is based upon records

on file.

In unusual circumstances where we are attempting a highly technical application, we do seek ideas. This could

either be formally, in the form of a consultant contract, or

independent ly

.

DR. SOMMERS: I am in favor of the process, but I agree with Ruth Davis that it can become difficult if it is

applied in every case. I would like to give a couple of

examp 1 es

.

57
I watched a person in the Air Force struggle for

some time with a very serious problem. The problem was: how

to do a more quantitative job of analyzing and justifying the

expenditures put into modernizing Air Force air bases. At the

time he was struggling with this problem it was slated to be a $700 million program.

He had the problems that Ed Cushen referred to of not

being able to define his problem well enough to put out an RFP.

This particular person dedicated about six months of effort to

talking with various contractors, first on a formal basis, and

then informally.

The net result was a much sharper definition of what

he wanted. I think it was almost the epitome of a sensible

way of procuring systems analysis or consulting seivices. There

was a fair amount of discussion that resulted in a more

carefully drawn procurement.

Most of us as contractors have participated in the

process whereby the Government has held a seminar and called

in companies. I recognize it is time-consuming. However,

when it is done well, when it is done with an intent to inform

and to have a two-way exchange it is very beneficial.

It would be beneficial to do it in most instances

where the problem cannot be well-defined and packaged neatly

into a statement of work.

DR. CUSHEN: We have a problem on that one, Bill.

At one of our earlier conferences, the accusation that kept

popping up from the floor was: "Look, if I do that for you, I am going to do a lot of work solving your problem. Then you

are going to turn around with all of this information that I have developed at my own expense, and you are going to publish

it as an RFP and then you are going to give the award to the

low bidder.

"So the net result is, I am coughing up an awful lot

of proprietary information for you and I am half solving your

problem for you, and you may publish an RFP and not really

intend to give out a contract.

"You already have the information; you have already

milked my brain for most of the information that is going to

be valuable. It is a real puzzle; I would like to have access

to the information and I would be willing to pay for it, but

in many ways I am not allowed to."

QUESTION - ENTIRE PANEL: "There seems to be a present

trend for the Government to compete with private prof it -making

58
consulting firms by working through FCRC's and other

Government agencies. Examples are NASA working for UMTA,

ONR working for DOT, DOD working for HUD.

"This is a major problem for consulting firms, since

we cannot compete financially. Will the trend continue, and

should private consultants forget Government business?"

DR. CUSHEN: I frankly think this trend is on the

downgrade. It still exists and there are still some directives

to use the FCRC's to the maximum extent possible. There are

some people in Government who believe that the Federal Contract

Research Centers are smarter than other people because they

have had the RAND-ITA type aura which says, "We can solve any

kind of problem." I think there is a feeling that there are

services that you can get from a non-profit that you ought to

be buying.

I think that the people we deal with tend to be able

to discriminate between the kind of services that they ought

to be asking a RAND Corporation or an ITA to do and the

services that they ought to be asking a commercial firm to do.

These people tend to have the perception that you go

to RAND or ITA to get a top-level think product but if you need

a real fast applied job, you probably ought to go someplace

else. Again, it is an incorrect perception, but this, I think,

is one of the prevailing bits of folklore.

DR. DAVIS: I am not so sure there is a trend in this

area; I think there is a complexity of factors that are changing

the situation.

Certainly, the FCRC's, RAND ' s and ITA's have been

divorced from being a captive of a single agency, due to

edicts. As a result, they are practicing among more than one

agency and they are having to offer their wares to every

agency in the Government. They are appearing to be in more

places than they were, but at a decreasing level of effort in

every place.

Abstractly, or theoretically, there should be no

problem, because no Government agencies should accept work

from another Government agency in competition with industry.

If these rules were adhered to strictly, as they are by some

groups, you would not have the kind of problems that are being

addressed by this particular question.

DR. SOMMERS: I do not think there is a trend in

this area right now. My own comment would be that this is

probably one of the more perplexing problems. Solutions have

59
to be found for this problem in the very near term. If

there is a trend, it is toward more use of FCRC 1 s across

Government, more use of Federal agencies working for other

agencies, not less, as Ed said.

Obviously, this is just personal opinion, not based

on any statistical survey.

One of the problems that you have to recognize is

that in the Federal agencies there is a capability, as there

is in the FCRC's, which has been bought and paid for with

taxpayer funds over a long period of time.

This investment having been made, there is a temptation to say: "Well, what Mitre knows or has learned in

systems management should be applied to EPA problems. What

NBS has learned about housing should be applied to Project

Breakthrough .

There is logic in both statements. At the same time

use of FCRC's and others does constitute competition to firms

like ourselves and I am sure to firms represented in the

audience. It is a dilemma.

There has been a lot written about this dilemma and

one of the problems is that in the midst of all this rhetoric

there really have not been an awful lot of firm recommendations

made on what to do.

I have just finished scanning a book on the non-profit

research firms and resources in this country, and I think one

of the conclusions is that the Federal Government has tended

to build some of these capabilities, both in the agencies and

the FCRC's, without a strategy.

Once you have an agency with the capabilities of the

National Bureau of Standards, as a specific case in point,

it does make sense to apply that to Project Breakthrough.

However, you have to have a strategy which determines if you

are going to follow this through and build a capability within

NBS that grows, to do something that industry might be able to

do, or are you going to purposely hold NBS to a level which

does not fully meet the needs?

I do not think that strategy has been worked out in

Government, and I think that is probably our biggest need.

QUESTION - DR. DAVIS AND DR. CUSHEN: "Why doesn't

the Government view management consulting services, as Dr. Sommers defined them, in the same sense as archi tectural

engineering services, i.e., procure on the basis of technical

competence, not price 7 " 60
DR. DAVIS: The question has inherent in it something

we have to watch with respect to Marxist philosophy. If I accepted the assumption of the question I would give the wrong

answer

.

The assumption is that we are procuring management

services solely on the basis of cost. I do not think there is

one philosophy of procurement. I am convinced that in many

instances, as in architectural -engineering contracts, that we are

procuring management and/or management consulting services on the

basis of capabilities and not just on price.

DR. CUSHEN: I think there is a wide variety of practice

inside of Government.

Circular A-76 with its explicit statements, which

appear in contrast with each other, "when you can buy it outside,

buy it outside," and then, "forget this when it applies to

systems analysis, if you want to;" indicates a need for the

promulgation of a doctrine from the top. There is a need for a feeling of confidence at the operating level that would make that

promulgation of the doctrine a fact rather than just simply an

empty statement that is unenforced.

QUESTION - DR. DAVIS: "What percentage of Government

procurement is in computer software, and what are the total

actual dollars of such procurements?"

DR. DAVIS: There are not well-defined numbers. The

latest GAO survey showed that about $2 billion a year was spent

on software and software maintenance services. About $4 to

$6 billion dollars a year was spent on the annual operating

costs of computers. If you take 6,000 computers in the

Government, you can get roughly the cost of either buying on a one-time buy or an amortized rent.

QUESTION - DR. DAVIS: Is the National Bureau of

Standards really a customer for professional services? If so,

what services, and who will procure them?"

DR. DAVIS: Let me relate my answer to the organization

that I direct which is in the computer sciences and technology

area. We are a customer for professional services in terms of

our mission in computer sciences and technology. One could

direct such questions to any of the managements of the Institute

for Computer Sciences and Technology.

QUESTION - DR. SOMMERS: "How did you get your estimate

of $1.5 billion for professional service contracts? The

Procurement Commission could not obtain such statistics."

61
DR. SOMMERS: We did a competitor-market analysis

last year in our company. It involved some fairly straightforward steps, most of which can be debated.

We simply took the budgets of each agency, found what

portion was R§D and then, through discussions, applied a judgment

of what fraction was professional services. Because R§D covers a number of things besides consulting and professional services,

including purchase of hardware and some facilities, it had to be

a judgment.

In the case of state and local governments, it was a much more difficult process. We worked through a number of the

state and local government associations, and the amount noted

there is a number which represents inputs from the 50 states.

I will not defend it as the right answer, but we went

about getting it in what I think is a rational way, and it did

take some manpower.

DR. CUSHEN: Let me toss in a voluntary answer here.

I was calibrating my market estimate with Dr. Sommers',

We took that "fiction book," the Budget of the United

States Government, and went down it line item by line item. Some

of the items we were thoroughly familiar with and knew exactly

what was likely to happen. Because of this we could make an

estimate as to how much we thought was going to be procured, but

the manager himself did not know, for example, how much he was

figuring on buying if he could, like a Human Factors Lab for the

Postal Service.

We knew what number they were figuring on and we could

also guess where that would inevitably lead them. We did this

for each of the items in the Federal Budget, and we came up with

a number that looks very close to Dr. Sommer's number.

QUESTION - DR. SOMMERS: "How can the small l-to-5-man

design office without a Government contract track record possibly

obtain contracts without excessive cost or effort against bigger

firms under present conditions?"

DR. SOMMERS: In the case of the unit that I work with

in Booz, Allen, we started out in 1955, as one of those small

companies with two people. That was undoubtedly a different

environment, as environments change with time.

I know in our case one of the strategies that we

followed was to concentrate on a very few specialties and try and

62
build a sole-source contract relationship in simply those two

areas. We were successful. I must admit that we had an

advantage. We were successful in that we did have the advantage

of being part of Booz, Allen.

The problem is one of the toughest questions for the

small company, and I do not know the complete answer.

Sometimes we in Booz, Allen think that we are competing

against tough competition when we compete against that 5-man firm,

because they can be so specialized and so much less expensive

because of their smaller overhead. In these instances they have

an advantage.

It is a question of strong skills. I still think the

skill and the capability is what gets business. If you are

truly competent in an area, do not spread yourself too thin,

stay to those areas and I think the small firm can succeed very

well.

QUESTION - COMMANDER DUNN: "How can the Government get

AE 1 s to take on complicated jobs, or one where the esthetics are

important, given the wide disparity in fees between commercial

and Government awards?"

COMMANDER DUNN: I take it the question asks, how can

we get innovative design from our A§E contractors when we have

more of a constraint, perhaps, on the cost of our construction?

We do not frequently seek innovative approaches in our

A§E designs. This is not to say that we do not want innovation

within the design effort. However, in terms of the corporate

design, we are not seeking innovation because we are normally

building upon a family or history of facilities and we want to

just adapt from what we have in the past.

In some specialized new efforts, and in some "monumental"

structures such as the Service Academies, we do and we pay the

price in the construction. The congress has gone along with us

on paying the price of construction, and I do not think this is

a real problem.

It is really a question of need. When we have the need

we are able to justify both the cost of the construction and the

cost of the design effort.

QUESTION - COMMANDER DUNN: "You mention no problem on

AE services procurement regarding the boundary between design

on the one hand and R&D work or special studies work on the

other hand. Is there such a problem? If so, how would you solve

it?"

63
COMMANDER DUNN: I am sure many people here would

agree that there is a large gray area when you go from "A§E"

contracting into other types of professional services. The

Brooks Bill attempts to define architect -engineer services. It

concludes with a statement that says:

"... are architectural and engineering

services as well as those incidental services

which members of these professions and those

in their employ may logically or justifiably

perform .

I guess that is about as clear a statement of the

uncertain area that exists. There is not a clear area between

consultant services per se and architect -engineer ing services.

Within the Department of Defense, the test that is

applied is: are the services applicable directly to services

or the system for acquiring facilities? If so they are

construed to be architect-engineering services. If they do not

relate directly to facilities or to that system for acquiring

facilities, then they are not.

QUESTION - DR. CUSHEN : "You mentioned the distrust of

the profit orientation of consultants by Government officials.

What can be done about it? Would you recommend some process for

overcoming this?"

DR. CUSHEN: You have to remember there are some people

who mistrust you and others who do not. One of the things that

we did was to go into an agency that felt that it had been stung

by a commercial producer and swore never again to go commercial

on a systems type study.

We picked up on this problem and said to the agency,

"Hey, don't throw out the baby with the bath water. It is

possible for anybody to get stung, besides which, you did not

say exactly what it was that you wanted to have done."

They paid us (NBS) about $2,000 to figure out whether

we were telling the truth about the commercial producer. This

was followed by $20,000 that said: "All right; you got off to a good start. Now take the next step."

Two and a half years later, that particular agency was

firmly convinced that the service that we provided was obtainable

on the outside a little bit better than we were able to do. They

are now in the habit of commercial contracting.

The lesson here is that it is possible to prove to

people who have had bad experiences that you can buy good services

on the outside.

64
Government is also infiltrated with a number of people

who tend to have a socialist orientation. I do not know how you

change those people, except to reassure them that things are

happening. I guess one of the more telling articles I ever read

was by Arthur S. Miller at George Washington Law School, who

said that anybody who believes that Government provides services

to the public should rethink the problem.

This is a Government-business establishment; it is a techno-corporate society and the faster we recognize that fact,

the better off we are going to be.

My only response to the question is; I think you can

show them, and I think persistence and performance will do the

trick. It is painful and costly, but it will work.

65

PANEL TWO: THE PROCUREMENT PROCESS

GOVERNMENT PROCUREMENT POLICY

Dr. Peter Waterman

Special Assistant for Systems

Office of the Assistant Secretary of the Navy (R&D)

Washington, D.C.

ALTHOUGH I AM NOT AN EXPERT ON THE SUBJECT, I have had

the opportunity of using professional services for about 30 years,

so I may have some minor insight into part of the problem.

The report of the Commission on Government Procurement

was issued yesterday. It discusses many of the things brought up

this morning.

One section (Chapter Nine) in the report is concerned

with procurement of professional services.

Someone mentioned earlier that they had made an

estimate of how much it cost the Government to procure

professional services. This report suggests that it is about

$1.8 billion, excluding architectural -engineering . I do not know

the basis of the calculation. I am not even sure that it is

possible to make such a calculation.

The report goes on to admit something which you all

knew, that professional services cannot be procured like hardware,

and that competitors, in a sense, have to compete on qualitative

terms, even though it would be nice to reach the goal of knowing

precisely what the measures were as one evaluated the several

proposals in advance. The world probably is not this way,

however, because fortunately we are dealing with professional

services, with people who do not think the same way and therefore

do not offer the same kinds of solutions.

We unfortunately deal in a world where, up to the time

where you become professional the schooling you go through suggests

that there is an. answer in the answer book, that every question

you address during the course has unique solutions.

At least from our vantage point, most of the questions

we address have never had an answer in the answer book. It is

very difficult to decide in advance what the evaluation criteria

will be.

There is a special recommendation that the Commission

makes to use a competitive proposal and negotiation procedure,

which takes into account technical competence, concept of the

end product, and the estimating of costs, including fee.

69
I do not remember offhand how many professional

services contracts I have been privileged to work on over the

years. It has been more than several, and in every case that

I can remember it was done by my calling somebody on the phone

and saying, "Joe, we have a problem; can you work on it?" Then

we worked out the details after the job had started.

You cannot always do that, but I can assure you that on

a good many important programs, that is precisely the way we do

it

Vagueness and Ambiguity in RFP's

The report identifies a number of problems. Among

these problems are the vagueness and ambiguity which characterize

many requests for proposals and that must be frustrating. It is

more frustrating to us than it is to you. Quite often the

problem to be solved is only a problem because there is not a current solution.

An Experiment With "Letters of Interest"

We have tried some experiments during the last several

years in which we presented letters of interest to industry. This

is a non-RFP. Maybe some of you responded to them. In one case

about two years ago we addressed three major defense problems

through letters of interest. We wanted to break clearly with the

traditions of the past. That is a difficult thing to do, because

we operate in a "cult-type" world. We have people who are

specialists in ordnance, in airplanes, and electronics. They

tend to think alike and in linear directions. What we wanted to

do was to break with those traditions of the past, because

indeed, in the Navy as in the other services, we are going to

have to break with the traditions of the past.

Interestingly enough, though we got lots of complaints,

we got over 100 fairly responsive kinds of innovative returns.

We were unable, in many instances, to solve the bureaucratic

problem of processing promptly all the things we would like to do,

but I think that is understandable.

One action which was recommended by this fine report

was that agency officials must clearly define the task to be

performed in requests for proposals. That may be difficult for

the agency officials.

If many firms can furnish the contemplated professional

service the agency should be authorized to obtain brief

preliminary data in order to select an appropriate number of

firms. The report says three to eight. As you recall earlier,

a speaker referred to the fact that some 200 people responded to

70
an RFP. We have had that experience also. It must be very

difficult for you to sort those things out in advance. The

recommendation of lowering this down to 3 to 8 people may also

have its problems.

In unusual circumstances, the report goes on to say, only

one firm may have the demonstrated capability. This turns out

to be quite often true if there is real research involved. The

Government does not involve itself very often in "real" research.

In "real" research the principle is clearly not defined in

advance. We often do applied research, but in those cases where

some special, fundamental work is required, you often seek the

guy who is doing his thing the way he is able to do it. There is

often no competition at all.

The report speaks to some other problems. They are

well known to you, but it notes concern over the use of

professional service contracts when they are not really

justified or required. They are used as a substitute for

developing essential in-house competence when we are taking a 10 to 25 percent cut, or the job has to be done and the people are

not available. Or they may be used as a result of getting

around a personnel ceiling problem.

We have some concerns in the Navy. Some things which

we are doing may take the form of policy because actions make

policy rather than declarations.

Professional Services on a Competitive Basis

We are trying to make the selection of professional

service contracts on a competitive basis. We hope to be doing

this more often and with more vigor. We are in the process of

reviewing the extended contracts, the ones which have beencomfortable for years, to determine whether they are just

comfortable or really required.

A Harder Look at the End Product

We are taking a harder look at the end product. Quite

often the end product gets to be a final report. That is an

anticlimax in most cases. It is something that happens after

the job has long since been completed. The end product may well

be something you do very early in the job rather than very late

in the job.

More often than not, the recommendations and

conclusions we get are in a form that we cannot implement. They

are often in a "you ought to go do something" form. However,

they do not suggest what you ought to do or what you should stop

doing in order to make it possible.

71
In our line of business, we never do anything without

stopping something else to make room for it. We not only have

a declining budget, the budget is also fixed at the top.

Professional vs. Personal Services

We have an effort under way to instruct project

managers as to the fine line difference between professional

services and personal services. It is very difficult, when you

associate a highly-qualified guy with a project manager not to

expect him to help in both areas. By stopping this practice you

deprive us of the opportunity of developing our own skills, and

we need them badly, because in the end there is a regenerative

effect

If we do not know something about the problem we are

not going to be able to define it. There has to be a balanced

understanding which goes beyond the particular task that may be

required

Expertise Creates "Cults"

We have a problem with some "cults" that have formed.

They easily form. We are trying to do something about them.

However, cults form by virtue of creating experts in certain

areas such as a management dogma, value engineering, reliability,

and other areas. We are looking these over to see whether or

not they perform a useful purpose on or off the job.

A Gradual Decay of Professional Capability

We have a problem of the gradual decay of professional

capability. It is a problem that we all face. Bringing in

experienced people and nurturing them to be future leaders is

very difficult. It is particularly difficult in the professional

services arena. This is because you cannot get experience

without working, and you cannot work unless you have experience.

This is a real problem.

In our Navy labs we had our greatest build-up of

personnel in the forties during the threat to national security.

We had an input of professional people, whose tenure eventually

amounted to 10 to 15 years. We are also at a point where a good many of these people are at or near retirement. They will

take with them a good deal of experience. Simultaneously we

are not hiring people because we are reducing the total overall

balance. This situation builds a pressure which is likely to be

felt by your industry as a group. It will reflect on our

internal capabilities to define the problem well enough so that

you can bring your expertise to bear.

72
Thus, the future is one of trying to work out the

"creative partnership" which was the theme of this meeting.

The pressure of the national economy is certainly going to

require us all to sharpen our wits. Our methods are going to

have to change from a linear extrapolation of the past. What

was acceptable before is not necessarily going to be acceptabl

in the future. We are going to need more interaction with the

"using" population in a more subtle way if we are to make up

this growing experience gap.

73
THE RELATIONSHIP OF PRIVATE ENTERPRISE TO GOVERNMENT PROCUREMENT

Dr. Robert W. Krueger

President

National Council of Professional Services Firms in Free Enterprise

Washington , D . C

I AM GOING TO TALK TODAY ON THE PROBLEM of the private

sector professional services industry with respect to the "make

or buy" decisions of the Government. This comes before some of

the other procurement problems you have been talking about today

and involves whether you should do these services in-house, by

not-f or-prof its , or buy from the private sector.

The Professional Services Industry Defined

First I must say a few words about the professional

services industry. As I define it the private sector professional

services industry has the following general characteristics.

First of all, it includes firms such as architectsengineers, management consultants, information sciences, and

systems analysts.

All these firms are for-profit. These firms are not

engaged in any manufacturing or construction so that they, like

the Government and not-f or-prof its , do not have the bias related

to the production of some hardware or construction. These firms

are 90 percent small businesses and deserve special consideration.

Being for profit, there is another characteristic that

they share. They are owned and managed, practically entirely,

by the same people. This means that they exhibit some of the

classic characteristics of capitalism that are not exhibited in

some major industrial firms. First, when an organization is

owned and managed by the same people it has a particularly strong

motivation for efficiency.

Second, they are competitive. This leads to desire for

efficiency.

if These firms currently total about $10 billion in annual

volume. Today, approximately $4 billion of that volume is

related to Government work. This includes architect -engineer ing

along with the professional services.

Decreasing Volume is a Great Problem

That number was larger a few years ago. Then it was

74
on the order of $5 to $5.5 billion. This decreasing volume is

part of the problem that I want to talk about today.

Because of this decrease as well as the economic

conditions during the last few years, the industry has been

rather flat in its growth. It has been growing around 10 or 15

percent per year on the average over the last 15 years. This

growth is expected again over the next 15 to 20 years.

There are five to ten times as many professionals in

Government and in hardware industries as are in this industry.

Also, there are the not-for-profit firms, which represent about

$2 billion dollars worth of Government work; Federal, state and

local.

Parts of Government Compete with Private Enterprise

The last number I am going to talk about is the poorest

number of all. There exists, we believe, somewhere on the order

of $4 to $5 billion worth of work inside the Federal Government

which is of a type which ought to be done outside the Federal

Government. About one-fourth of that, namely $1 billion,

represents work that is done by one agency for other agencies,

for state and local governments, or for foreign governments.

What I am saying is that there are some parts of our Federal

Government that are in competition with private enterprise.

The speakers I have heard this morning have demonstrated

that their attitude of cooperation with private enterprise is

very good. I am referring to a lot of activities in the

Government where there is not the cooperation that has been

expressed here this morning.

The National Council, of which I am President, was

formed a year or two ago to represent this entire industry.

Currently it has about 400 firms as members. More importantly

it has the major trade associations that represent the

principal segments of the professional services such as the

Consulting Engineers Council, the Planners Association and the

Laboratories Association. We hope to have the Management

Consultant Organization as part of our National Council.

The National Council's principal purpose in life is to

fight what we believe has been an accelerating trend toward the

use of in-house services and not-f or-prof its . In addition, and

while we are at it, we are trying to get across the image of

the professional services industry, not only to the Federal

Government but to the state and local governments, and even to

the hardware industry, which tends to use not -f or-prof it s instead

of private sector firms.

75
An Historical Review of the Problem

The Hoover Commission, in the early 1950's, recommended

some important changes which were instituted in the early days of

the Eisenhower Administration. Let me say parenthetically that

these "make or buy" policies of Government affect the entire

private sector. They affect hardware, too, but much less because

the Government does very little hardware production inside the

Government. The service industry, including services beyond

professional services, is very strongly affected by the

Government's policy with respect to in-house work and not-forprofits than are the hardware elements.

In any event, getting back to policy, a very favorable

policy which existed between 1954 and 1965, by a series of Bureau

of the Budget Executive Orders, made it very difficult for the

Government to use in-house services. It said, for example, that

the external service would have to cost substantially more than

any internal service for internal service to be used. Even then

proper justifications had to be made, with suitably high officials

During this period, the Government's policy fostered the

development of the Government work portion of the professional

services industry. A number of companies came into existence

during this period which might not otherwise have come into

existence. I believe that is one of the Government's basic

requirements, namely, to do things to foster the development of

private sector elements.

This policy worked well until the period 1965-67, when

these favorable policies were changed to adulterated policies in

the form of the document that has been referred to before, A-76.

"Incremental Costing": A Reason for Lost Business

The A-76 document, while stating a preference for the

use of private sector services and also hardware, has a group of

escape clauses. I will not go through all of them but there is

one in particular which is outstanding and which has caused us

loss of business during the last six or seven years. This is the

so-called "incremental costing principal," wherein a Government

agency can justify in-house if it can say that the cost of the

professionals and their fringe benefits, in-house, is less than

the cost of the entire services outside. That is, the entire

services outside meeting the cost of the professionals, their

fringe benefits, all the overhead, and the profit.

Internally then, the Government is leaving out of this

cost comparison all their overhead. Certainly when objective

analyses of Government overhead have been made it is at least in

the region of 150 percent.

76
As one Government official remarked, if this policy

were followed in all cases the comparison would almost surelylead to every job going in-house.

Indeed, although A-76 does not absolutely require

incremental costing, it allows it. Many Government agencies,

unfortunately, the DOD, for example, have used this policy in

recent years to do work in-house much more than before 1965.

The Commission on Procurement spoke to this matter in a majority and minority report. This section is on "make or buy"

decisions

The majority report did not make recommendations for

very much improvement along this line. The minority report is

very much along the line I am talking about. It states that

whenever there are viable competitive sources available on the

outside, regardless of price, they should be used instead of

in-house work. The National Council is hoping to persuade the

Executive Branch along the line of the expressed philosophy of

the President and his various officials, that they should adopt

a policy similar to the minority report.

The No t - For - Prof it Problem

So much for the in-house problem. One aspect of the

not-for-profit problem was referred to earlier as the FCRC's.

This is really not the largest problem regarding the not-forprofits. FCRC's were very properly encouraged into existence

in a sponsorship manner in the early days after World War II.

This was done by the Government because there was no available

capability in the private sector. It was the proper province of

Government to do such a thing.

Later on, due to the favorable policies that I referred

to earlier, beginning in 1954, organizations did come to work

with the Government and also came into competition with the

then existing FCRC's. FCRC's then spread from the work for their

particular sponsoring agency to working for other agencies.

They have continued in existence in that fashion and have worked

for state and local governments as well.

While they are not a large part of the competitive

problem with the private sector, they represent $200 million of

work. They are still given very preferential consideration in

the form of sole-source contracts. We believe this is unfair,

and we feel that they should be in competition directly with the

private sector organizations that are capable of doing the same

thing, rather than being given sole-source contracts.

77
Not-For-Prof its Should Compete For Applied Research Work

However, I am more concerned with the other elements

of the not-f or-prof its . Let me quickly say that universities,

in the main, are engaged in basic research, and this is not a sphere of interest in the work activities of the professional

services industry. There is a small part of work in universities

which is in applied research and it is increasing. I am mainly

referring to the not - for -prof it s who were not originally

sponsored by the Government. These were also sponsored by

universities. They were simply private organizations looking

for the favored treatment that no t - f or -pr of i t s get from the

Government. The main source of this favored treatment comes in

the form of grants.

Grants were instituted in the early days by Congress,

by public law, and were aimed at basic research support. Over

the years grants have become heavily applied to applied research,

the work that professional services industry can do.

What happens, of course, is that an agency gives work

to a particular not-for-profit, one of the independent NFP's or

part of the applied research work of some university. Support

is a grant with no more justification than the sole-source

justification required in the case of giving work to the FCRC's.

These grantees are not the normal contractors. Grants

can be given simply because the agency people like a particular

organization, and indeed, certain agencies have close affinities

with particular groups. They give work to those over and over

again

We, as the association that represents the professional

services industry, are asking that all such work which the

professional services industry is capable of doing be opened for

the contract route and for competitive contracts. Let the notfor-profits compete. We believe, due to our efficiencies, that

we will ultimately get more of the work. Nevertheless, we

simply want open competition in the areas in which we are capable

The Congress and Executive Have to Act

The grant problem can partially be solved by the

Executive Branch, where the Congress has given the Executive

Branch the right to choose either grants or contracts. HEW's

activities are probably the largest example of the use of grant

activity. In HEW part of the work may be done in one form or

the other. We are asking them, by Executive Branch choice, to

choose the contract route. The other side of the picture is that

by Act of Congress, the grant is required to be given. Here we

are seeking the aid of Congress in changing those laws so that

this type of work will be opened up for competition.

78
LEGAL ASPECTS OF GOVERNMENT PROCUREMENT

Mr. Gene Perry Bond

Gadsby and Hannah

Washington, D.C.

THE BEST WAY TO DISTINGUISH WHAT I AM GOING TO SAY

relative to the legal aspects of Government procurement is to

discuss remedies. I will discuss the remedies that both the

contractor and the Government have, pursuant to Government

contract disputes which arise prior to the time that the

contracts are entered.

Remedies are actually the best way to distinguish

Government contracts because the contract principles of law are

not substantially different from the general overall development

of contract law.

The legal remedies in Government contracts are not

tailored to the nature of the industry or the nature of the

company's business. The remedies that a professional service

firm might have are no different than the remedies that any

hardware manufacturer might have.

It is a fair generalization to say that the law that

has grown up in the Government contract area has grown up by

virtue of disputes which have arisen between construction

contractors and hardware manufacturers on supply contracts. Of

course most of that law emanated from the large procurements of

the Department of Defense.

Legal Remedies Different Before and During Contract

The important thing to remember is that the nature of

the remedies which either the Government or the contractor have

are different depending upon whether the problem involved arises

prior to the contracts or during the performance of the contract.

Therefore, the best and most logical way to break down this

discussion is to discuss pre-contract and contract remedies.

I will try to canvass these remedies for you.

Pre-Contract Remedies

When you are discussing pre-contract remedies, you must

keep in mind that both parties to the contract can take action.

The Government can go to the General Accounting Office and seek

an advance decision on a contested procurement or a procurement

about which it has a question. The contractor can file a bid

79
protest with the Comptroller General and seek the same remedies:

to try to set aside the procurement, to try to have the procurement held up while this issue is decided, or to set aside a contract award.

I must admit, speaking as a private attorney, that when

I think of the General Accounting Office in the bid protest area,

I think first of that old jingle: "Who's afraid of the big bad

wolf?" I substitute GAO for "big bad wolf." The statistics

show, unfortunately for us who represent protesting contractors,

that we are normally going to lose.

90 Percent of Bid Protests Denied

Surveys made on a year to year basis show that 90 percent of all bid protests that contractors file are denied.

Perhaps the more important point is that the 8 or 10 percent that

are granted by the Comptroller General are oftentimes simply

empiric victories for the contractor.

I hate to talk this way, but I must confess that I cannot state flatly that a protest to the GAO is a completely

effective remedy.

On the other hand, it is really the "only game in

town," and I think you will agree with me after I discuss some of

the other remedies.

The most significant and most active role of the

Comptroller General is GAO 1 s role in bid protests.

The remedies we are talking about stem jurisdictional ly

from the Budget and Accounting Act of 1921. There isn't anything

in that statute which says the GAO can rule on bid protests, but

it is more or less a "jurisdiction by implication." Over the

years the Comptroller General has simply assumed this authority

which was originally given to the Comptroller of the Treasury

back before 1920 by the Dougherty Act. The authority is there.

Congress has never interfered with GAO ' s exercising this

authority to render advance decisions. It all stems from

language in the statutes, which says that the GAO can render

advance decisions on any question involving payment by a Government Disbursing Officer under a Government contract. So

this is how the Comptroller General got into the jurisdictional

area

Now, what about the procedures related to this remedy?

What are the factors involved?

One thing to recognize is that the Comptroller General's

staff, the people who work for him and who decide these bid

protests, have no firsthand knowledge of the facts. They rely

80
primarily on the facts set forth in the procurement agency's

report in response to the protest. They do give credence to

what contractors say, but whenever there is a disputed issue of

fact, the General Accounting Office normally follows the

Government's view of the facts. This frankly, in my personal

opinion, is probably one of the most serious problems in the

GAO's handling of these cases, because it impacts on the

effectiveness of a protest as a remedy.

However, when you compare its availability and the

cost with the alternative pre-contract remedies you will see

that it is still the best way for a contractor to air his

problems about any particular procurement.

I have not read a full summary of the Commission's

report, but I have glanced at a summary. The summary does not

really treat this issue well, and I think that is unfortunate.

They do state in the summary portion of the report dealing with

GAO procedures that they do not feel that GAO should have the

full battery of due-process procedures available to it when it

decides a protest. In other words they should not have hearings,

arguments, cross-examination of witnesses, transcripts, and so

forth. I do not disagree with that.

I do disagree with the omission of the discussion of

this problem. I do feel that there should be some vehicle

created whereby criteria can be set which will help the

Comptroller General and his staff evaluate factual disputes with

some other tool than simply saying: "Take the Government view."

How About Going to Court ?

What about going to court?

You never used to be able to go to court if you were a frustrated bidder. Under dicta in a Supreme Court decision

called Perkins versus Lukens Steel, everyone had the idea that no

one had the right to a Government contract. That was changed in

February 1970, in a case called Scanwell versus Thomas.

Scanwell was the Administrator of the FAA. The case came down

from the Court of Appeals for the District of Columbia.

Scanwell created standings, so that frustrated bidders

could go to court and get the court to listen to them. This is

still the law.

What happens after you get into court?

By virtue of post-Scanwel 1 decisions, particularly from

the District of Columbia, the Courts' role in these cases is

extremely limited. There is a very heavy burden on contractors

who go to court to seek to set aside procurement agency actions.

81
If a procurement agency can show to a court that its

Temporary Restraining Order, preliminary injunction or any other

form of equitable relief will somehow interfere seriously with

the operations of the procurement agency, particularly military

operations, there is very little likelihood that any contractor

is going to get relief. Even if he gets relief from the District

Court, the District Attorney will go to the Court of Appeals and

reverse the District Court within 24 hours. The reason is that

they do not want contractors interfering with the procurement and

supply system of urgently and seriously needed items.

If you can show the Court that this is not the case and

that the procurement agency can work out some kind of temporary

formula whereby an encumbent contractor can keep supplying the

needed items until the resolution of this pre-contract dispute in

the Court you might have some chance.

There are other collateral problems to going into court

for a contractor, one of which is that he must post a bond. If

he posts a bond and loses and the Government can show the Court

that there was no real basis for going to Court in the first

place, he could be liable under the bond for large sums of money.

I would have to summarize by saying that court

procedures are costly, time-consuming, have not yet provided

thoroughly effective relief, and an unsuccessful contractor can

expose himself to damages under the bond in case the Government

decides to sue under the bond. In one case they were successful.

GAP and Court of Claims Best Pre-Contract Routes

All of these are reasons why I think the state of the

law is such that the contractor, in his pre-contract remedies

should confine himself to either one of two things: going to

the GAO and hopefully falling into that ten percent category or

going to the Court of Claims or the District Court and suing for

his bid and proposal costs. Under two cases which were decided

by the Court of Claims, Hire Products and the Keco Industries

Case, the Court of Claims held that there is an implied

obligation whenever a government issues any kind of a solicitation, that it will fairly and honestly evaluate your proposal.

If you can come in and show clear evidence that that has not

been done, you could be successful in getting your bid and

proposal costs back. You will not get lost profits. The reason

you will not get lost profits is because the court's reasoning

is: how can you get lost profits when there has not been a contract entered into in the first place?

Contract Remedies

Now about contract remedies. How are disputes resolved

during performance, regardless of whether they involve the GFP

82
clause or whether they involve a specification question or

whether there are constructive changes claims in question?

The Disputes Clause

What is the mechanism for the resolution of these?

Incidentally, I am not even getting into the substantive law of

how these different disputes under different clauses are resolved

The mechanism is the Disputes Clause. The Disputes Clause is a standard Government contract clause in almost every contract. It

is an outgrowth of the disputes settlement procedures which were

originated in World War I.

The first authority to decide disputed questions of

fact resides in the Contracting Officer. He is the one, and only

one, that can commit the Government as far as dollars are

concerned

The Disputes Clause sets up a system whereby the

Contracting Officer and a Board of Contract Appeals are the

arbiters of these disputes. There are many Boards of Contract

Appeals, many Government Departments have them. The most famous

one is the Armed Services Board of Contract Appeals because the

DOD has done the most procurement.

Those Boards of Contract Appeals have charters which

say that they are the designated representatives of the Heads of

Departments of their particular Departments, to decide disputed

questions of fact. In this environment the contractor can have

what is called in the law a de novo hearing on the evidence, a brand new hearing on the evidence.

He can put in evidence, he can swear witnesses, he can

file briefs arguing his theory to the Board Member who hears his

case. It is a full adversary proceeding, even more important in

recent years because as a result of two or three Supreme Court

cases, it is the only tribunal where you can present your

evidence

Even though there is a law called the Wunderlich Act,

which allows you to go into the Court of Claims and review an

adverse Board of Contract Appeals decision, you cannot get the

Court of Claims to take new evidence. If you have something

you want to present, make sure you put it in at the Board of

Contract Appeals level.

The Board of Contract Appeals, by the Disputes Clause,

which you agree to when you sign the contract, has the final

say on all questions of fact. It is a quasi- judicial operation,

so the Hearing Members are applying the law to these facts when

they issue their written decisions. However, what they say about

the law is not final. The fact-law dichotomy which you see so

83
many places in the law occurs right here.

The Board decides facts, but it cannot decide law.

It can decide facts finally, but it cannot decide law finally.

If you feel, under the Wunderlich Act, that the Board has given

you an adverse decision which is insupportable, you can go to

the Court of Claims and review that decision.

This Act, this Wunderlich Act, allows review of

decisions of Boards of Contract Appeals which are shown to be

capricious, arbitrary, fraudulent, or so grossly erroneous as

not to reflect consideration of the law.

Breach of Contract

The other area for contract remedies is the area of

breach. Normally in standard commercial contracts, if you think

one of your rights or obligations has been violated, you can sue

in court for breach of contract.

The Government contract remedies, however, are not that

simple. When you get into the question of breach of Government

contract, you get into a whole maze of alternatives. It is often

difficult to determine whether or not what the Government has

done or not done rises to the level of a breach of contract

which would permit you to go into court, or whether it is simply

a claim arising under one of the contract's terms and therefore

you would have to go to the Contracting Officer and then to the

Board

Suffice it to say that the present state of the law

requires that all contractual forms of relief go first to the

Contracting Officer and the Board, and then if you need a review

in the courts you can get it.

This is a quick summary of the law that has given rise

to disputes, disputes between different Government agencies.

There was an extremely important case decided in

April of 1972 in the Supreme Court called the S&E Contractors

Case. In this case a situation existed whereby the General

Accounting Office reviewed a decision of the Atomic Energy

Commission that had been favorable to the contractor. The

General Accounting Office held that it had the authority to review

Board of Contract Appeals' decisions, and that therefore it was

essentially in the same position of the Court of Claims.

This was reversed by the Supreme Court. Under the

S&E Case the Court held that GAO had no right to review Board

decisions adverse to the Government. Neither did the Department

of Justice have a right to review Board decisions adverse to

the Government's interests.

84
The Procurement Commission disagrees with the S&E Case

because it has recommended that the Government be granted

judicial review of adverse decisions. This is contrary to the

S&E Case, and I think this was a case where the rationale of the

Supreme Court is correct.

That rationale was as follows: the Supreme Court said

that the contractor, when he signs the contract with the

Government, agrees to continue performance of the contract

pending resolutions of the disputes under the Disputes Clause.

If he wins under that Disputes Clause, and if either the

Contracting Officer or the Board agrees with him, he should not

be forced to go into another series of long litigations by virtue

of the Justice Department coming in and appealing the Board's

decision

The objective leading to an end to litigation would not

be served if Government officials other than the ones who are

mentioned in the clause itself could simply veto the procurement

agency's decision. I think that is a good decision, because I think most Boards of Contract Appeals are objective tribunals

and have done a good job.

Public Law 85804: Another Remedy

Another contract remedy is Public Law 85804 which

applies only to agencies connected with Defense. It provides

for the correction of mutual mistakes, formalization of informal

commitments and "requests for amendments without consideration."

All the implementing regulations are in Section 17 of ASPER, but

that is a military-related statute; it does not apply to

civilian functions. The Commission on Government Procurement

has recommended that it be broadened to cover civilian functions.

What about the General Accounting Office in disputes

situations? Because of the S&E Case I do not think that the GAO

will take much of an active role in disputes remedies, but it

still has authority under the Act. The words are still in the

Act; they were not thrown out by the Supreme Court. The Budget

and Accounting Act still states: "All claims and demands by or

against the Government, all accounts with which it is concerned,

either as debtor or creditor, are to be settled by the General

Accounting Office."

However, I think their role will be diminished by

virtue of the thrust of the S&E Case.

Under the Act the Comptroller General can set off

amounts owed the Government against sums owing to the contractorclaimant, so a contractor, upon final settlement with an agency

85
involved, may petition the Comptroller General to determine the

amounts owing the contractor under his Government contract.

This does not normally occur. It is a secondary remedy

only. Normally these things are resolved in the Disputes Clause.

The final remedy I would like to mention briefly is the

liquidated damages remedy. If you are a contractor and you have

liquidated damages assessed against you by the procurement agency,

you can go into the General Accounting Office and seek to have

those liquidated damages either wiped out or reduced. The

Comptroller General has discretion under the law to make a decision on what he considers a just and equitable assessment.

That is a very quick review of the legal aspects of

procurement

86
A PROPOSED GOVERNMENT SYSTEM FOR PROFESSIONAL SERVICES

Mr. John E. Moriarty

Administrative Officer

Technical Analysis Division

National Bureau of Standards

Washington, D.C.

I WOULD LIKE TO PREFACE MY REMARKS ABOUT THE SYSTEM by

saying that the Technical Analysis Division has been studying

procurement for a good many years. In 1966, Dr. Cushen had the

first Users-Producers Conference which emphasized the role of

OR Analysts and what they could do in Government.

In 1969 a second conference was held which looked at the

private sector and Government agencies and attempted to define

what the Government expected of private agencies and vice-versa.

In 1970, case studies in Federal domestic policy were given at

the third Producers-Users Conference in an attempt to determine

exactly how the roles of Government and private agencies fitted

together

Early Attempts to Establish a System

About that time, the Technical Analysis Division was

attempting procurement policies that would permit us to hire a particular specialist in economics, a mathematician or a private

company to work on our contracts. It turned out that the average

procurement time was somewhere on the order of 40 to 60 days.

Some of our contract procurements ran as long as a year. The

procurement people were telling us that we had to go out on open

bid.

A Basic Ordering Agreement

When this happened, many of the contracts were never

finished. We just ran out of time. We could not procure on the

outside, so the Division was in a quandary. The Technical

Analysis Division, being what it was, proceeded to innovate. In

1971 the Division tried a basic ordering agreement for

professional help. The idea was that we would issue a Basic

Ordering Agreement in five major categories. As the need for

contracting by the Bureau or by our Division arose, we could

simply give out the contracts to the people who were on the

Basic Ordering Agreement.

In 1971 as a result of this policy, letters were mailed

out to all sorts of companies. We asked for solicitations to

join in this Basic Ordering Agreement. Early in 1972 the

Commerce Legal Department began to look over our basic Ordering

87
Agreement and stopped the entire ordering agreement.

In fact, here is what the lawyers said; "Although it

is not stated explicitly, it indicates that competition would be

obtained only from those firms holding Basic Ordering Agreements;

thereby, other qualified firms not holding Basic Ordering

Agreements would be deprived of the opportunity to submit

proposals for individual projects."

They also said the procedure was inconsistent if it

requires the Contracting Officer to solicit the maximum possible

sources without regard to firms holding Basic Ordering Agreements.

The legal people said: "Government needs are

indefinite at this time and cannot be a basis for a meaningful

compet it ion .

I think one of our previous speakers mentioned the idea

of having a Basic Ordering Agreement for special services. Legal

says that there is no way of specifically defining a task under

the procurement regulations and at the same time having a Basic

Ordering Agreement against it.

In fact, they went on to say: "In light of the fact

that there is a myriad of organizations that are experienced and

capable in one or more of the scientific areas it would be

improper to award Basic Ordering Agreements to only one of

several organizations, and to restrict competition to them based

on the solicitations necessarily of broad and imprecise criteria.

"In fact, there is no assurance that the holders of

Basic Ordering Agreements will be the best qualified organizations

to perform a scientific task."

Loosely translated they were telling us that if we had

something to build we could give you a specification with blueprints, dimensions and some way of quality-control for checking

it; and if I could further show that I needed that specific thing,

as well-defined, and yet the quantities were variable as to when

delivery was needed, then I could have a Basic Ordering Agreement,

providing I went out on an open procurement in the first place.

However, when it comes to scientific help they say

there is no way, either in applied or basic research, that we

as an operating Division could have a Basic Ordering Agreement.

Finally, and I guess this is probably the toughest thing

of all to contradict, they said: "National Bureau of Standards

does not have the authority to contract for the needs of other

agencies."

88
The Technical Analysis Division has many of its contracts

from other agencies. It is our custom, when we need special

expertise, to subcontract some of the work.

The Legal people are saying, in effect, that one

Government agency cannot really act as an agent for another one.

So it is illegal for us to set up a Basic Ordering Agreement

for HUD, HEW or someone else, and then subcontract to a private

industry

With these objections, the pre-qual if ied bidders' list,

the Basic Ordering Agreement that was originally set up, came to

a halt.

An Attempt to Meet the Legal Constraints

We then reopened negotiations with the Legal people in

an attempt to generate another system that might work, a system

that would at the same time meet all the constraints that were

being imposed upon us.

The result of this series of meetings was the "Prequalified Bidders List." This is simply a variation on the twostep process that has been referred to before. However, it has

some unique aspects. Our division has developed a working model

of the system. At this point we would like to give it to other

Divisions, but as it stands right now, the Technical Analysis

Division is the one that is using the system.

Here is How the System Works

First, the system is designed to comply with the open

bidding requirements. One way to comply is to send to anyone

who is interested a comprehensive document which contains test

problems, and asks questions in a specific format, like:

"What types of personnel do you have who

are specialists that you would like to submit

as references?" and, "What types of special

equipment, computers, do you have?"

Although there is no actual contract being given, we

send these documents out. The 400 or 500 or so firms that are

cooperating with us send back brochures describing what they

can and cannot do. They also include the different areas in which

they are interested.

When these brochures came back we discovered that it is

possible to categorize one company in an area of specialty or

it is possible to categorize one company in a group of areas of

specialty. We have done this categorization.

89
This is really the first step of the process. At this

point it is not different from any other process in the past.

The possible exception is the way we ask the questions. But it

does not stop there.

The Second Step

We now ask three more pertinent questions:

"Are you a large or small business?

Are you a minority business?

Are you in a labor-surplus area?"

We have to ask these questions because we were told to

look into how are we helping SBA, how we are helping EEO, how

we are helping the Labor Department, and what else are we doing

to equalize contracts.

The Third Step

Finally, the legal people were worrying about the size

of the market. They were saying that the Technical Analysis

Division typically goes local. They were saying that we sit

around the table and say: "Who knows somebody that can do the

job?" This is not quite the way it works.

Under the new system, the idea would be to look under

a general category and- find out, by going through our list of

pre-qual if ied bidders, how many people in the files are qualified

to perform the work. This means that, in effect, we have all

year to meet the open bidding requirements and to solicit

examples of your work. These examples would be in artificial

problems or series of problems. However, the problems would be

a good indication of competency.

The actual RFP goes out to those people on our list

that are in fact qualified. It gives us, as the technical

people, time to read, and to discuss with the individuals that

submit. We can write letters, we can call, we can converse; we

are not doing anything against the Federal Code in terms of a specific contract. We are not biasing anything, because at this

point we are qualifying you.

Five Scientific Groups

Presently we are developing five scientific areas in

the list. The system, of course, is flexible enough to expand

in any direction, but these areas are designated as:

90
Health Programs

Systems Engineering Qt -, es

Transportation and Environmental Studies

Urban Systems

Behavioral Sciences

For each of these areas which we call a scientific

activity, there are typical tasks and anticipated requirements.

We present these to anyone interested in order for them to

answer and comply with the open procurement regulations. It is

only required for us to advertise every six months. If we

advertise for these lists every six months, then we have

fulfilled at least to Commerce Legal's satisfaction all the

requirements for open procurement, assuming that we use our list.

This answers the first legal objection, which keeps

competition open and unrestricted.

No Need for Precise Definitions

Since the list only constitutes potential contractors,

the need for precise definitions of work is nonexistent. As a matter of fact, since the lists pre-qualify you, we do not have

to define the tasks, as some of our prior speakers have been

saying

We can emphasize special criteria and special equipment

that you have. We can talk in generalities without the need for

a specific task description.

If someone proposes, there is no objection to putting

them right on the list, assuming they are qualified. This means

that if you are not on the list now, and you get word that there

is some kind of an RFP going out or a contract we are looking

for it is possible to do the two simultaneously. There are no

restrictions in that form.

Why is this System Unique?

I would like to describe why this system is unique.

First price is d e - emphas i z ed , and it is de - emphas i z ed in a number of ways

It has been our experience that large corporations

have the ability to underbid small companies. They also have

the ability to write newly formed companies right out of the

procurement process under conditions existing today. Minority

91
businesses are always in trouble, and SBA and others are saying:

"Look, we have lists of companies that

would like to get in on the action and do not

know how. They have no way of circumventing

the system to get in."

So we have it broken up into two parts. Assume for

instance that TAD has a contract to release. It may be in the

behavioral sciences or another discipline. We immediately go

to this list called "Behavioral Sciences" and pick out from the

pre-qual if ied bidders all those that appear to be reasonably

qualified to do the job. It is immaterial whether they are

large, small or in-between, just those who appear qualified to

us from the information we solicited.

Those are the people that get the Request for Bid, and

under this system you may even get a request without ever knowing

that the project is coming up.

When you answer you will be given the usual time

constraints. We will use any contract form in the Code of

Federal Regulations and, as usual, we will still have the

problem of defining the task. When your proposal comes back to

the Government, we split it into two parts.

One part constitutes the technical side and one part

constitutes the financial side. The Division that gave out the

contract has a simple rating system. They are looking at the

proposal in terms of technical content, the equipment that is

offered, the types of requirements for people, your staff, the

resumes that came in and so forth, and their honest opinion as

to whether the job can be done.

The procurement people, on the other hand, are looking

at how well the bid price was constructed in the first place,

the credit of the company, their batting average on past procurements, and finally the bid price.

Since the bid price constitutes only 10 percent of the

total award system, 90 percent of the criteria of an evaluation

of the contract is for something else. The bias is on the

technical side. In other words, 60 percent of the total point

value is technical, and 40 percent has to do with administration.

There is no attempt to equate administrative because we feel that

the bias should be on the technical side. After all, that is

what we are all talking about when we procure a company to do a

j ob

Then the two point categories are simply added up and

the highest point total gets the award.

92
In order to further satisfy the Commerce people, we

have set the system up mechanically, ready to be computerized,

in order to generate procurement lists by types, for instance,

by small business, by code, by minority business, or non-minority

business, by labor surplus, by university, as well as other

groups. The system is set up such that we can start classifying

and even generating statistics on what has been happening to the

lists and how they are working.

We have approached Commerce with this system and, of

course, their procurement files are five times as large as ours.

The system lends itself to this situation.

To summarize the system simply amounts to this: to

wait three or four months to get an RFP out the door, to wait

another 30 days or even six months to get RFP's and responses

back and also have to tie up all kinds of technical people's

time means that the original question has probably changed

anyway

Commerce assures me that under this system it is

conceivable for ordinary contracts to- be turned around in less

than 15 days. We can do this because we can openly procure, we

can sole-source, in effect, if we can show that the lists

contain only one vendor with special equipment.

An example of this came up recently in a behavioral

science contract in which the behavioral scientists needed a special room which contained one-way mirrors and some movie

camera equipment with which to do analysis. We only had one

vendor who was qualified; hence it came out as a sole-source.

Since the system began February 1st we cannot tell you

how effective it has been. It has not really started except as

a working model. I can tell you that as a model it has answered

the procurement and legal questions of Commerce. Mechanically

it is workable. It is not complicated. It does not take much

time for the Government to search the files to pre-qualify

peop 1 e

We are at the stage in

As far as other Divisions, other

available; whether they will use

which we have a working model.

Departments, the system is

it time will tell.

93
PANEL DISCUSSION, QUESTIONS, AND COMMENTS

PANEL TWO: THE PROCUREMENT PROCESS

QUESTION - DR. KRUEGER: "The Comptroller General's

decision of September 11, 1972 provided the EPA, significantly

restricts the number of situations where one agency can get goods

or services from another under the economy provisions. Is your

organization satisfied that the Federal Government is not

competing with you?"

DR. KRUEGER: I am not thoroughly familiar with that

particular act of GAO's, but I would certainly say that in

general I am not satisfied, from past experience with regard to

other agenc ies

QUESTION - MR. BOND: "Comment on the Fairchild

Industries case with NASA and on the reversal of the contract

award for the ATS satellite contract. Was that taken beyond GAO,

and does this set any precedent?"

MR. BOND: I believe in that case there may have been

some contact with the Legislative Branch. I do not think that

was controlling any more than I would think it would be

controlling in any GAO protest.

It is standard procedure for contractors to alert their

constituent Congressmen of a protest if they are vitally concerned.

Sometimes this accomplishes an awareness on the GAO's part, if

the Congressman's or Senator's staff takes an interest. They are

after all a Congressional agency, so they are sensitive to this.

I imagine they can be influenced but frankly my personal view

is that the GAO, if it thoroughly examined a contested procurement issue and came to a decision, would never change its mind

by virtue of Congressional interest. I have never seen it happen.

In the Fairchild/GE protest, the company talked to

Congress, and I would not be surprised if it talked to someone

in the White House. In my opinion, and again this is just one

man's opinion, the determining factor in that turnaround was the

fact that the Administrator of NASA did a reversal, and set up

an evaluation group which came to a decision different from the

decision made by the procurement agency. I think that is the

primary reason why Fairchild won that protest.

QUESTION - JOHN MORI ARTY : "In evaluation of proposals,

you said 10 percent would be for cost, 60 percent for technical

and 30 percent for administrative aspects of the proposal.

"Will you name or discuss some of the items under

administrative aspects?"

94
MR. MOR I ARTY : Yes. First let me correct those

percentages. It is 60 percent technical, 40 percent

administrative. Those are the two major breakdowns; cost is

one category within these.

As far as the administrative side goes, we are

interested first in the credit rating. What is the credit

history of a company? This is particularly useful information

for new businesses just starting. Some of the companies that we

deal with do have an interesting credit rating.

Secondly, we are interested in the bid price itself.

We are interested in another category, which simply is: how

was the bid price determined? What mechanism was used? Was

there just somebody writing numbers down, or was there really

some sort of a scheme or vehicle used to determine it?

Finally, in the last administrative category, we are

interested in the financial solvency of the company and their

ability to finish the contract.

QUESTION - DR. KRUEGER: "How much do you think grants

are going out on the buddy system?"

DR. KRUEGER: Certainly a substantial number. In the

agencies that use grants in the main, the people who are

instrumental in letting them have close relationships with

particular institutions.

I must certainly admit that the cumbersomeness of the

procurement process is another reason for letting grants rather

than contracts when the agency has a choice.

QUESTION - DR. WATERMAN: "How do you define

professional services versus personal services?"

DR. WATERMAN: The professional services that I was

referring to are those where a person is highly skilled in a particular line of endeavor: a physicist, a chemist, or a specialist in some kind of analytical process. The other type

comes about in curious ways. We find it convenient to hire

professional services who turn out to be clerical help because

they are willing, intelligent and capable and begin to type in

forms, fill in data, and assemble information. We have such

a flood of paperwork required that there is a lot of pressure

to get people to do these tasks.

I was distinguishing between those two things.

QUESTION - JOHN MOR I ARTY : "Will the new system provide

for a face-to-face presentation in addition to responses to

written questionnaires?"

95
MR. MORIARTY: It provides for face-to-face presentations in terms of the pre-qualifying

For example, if we picked ten firms, selected ten firms

from the list, at that point everything would be the same as it is

in the standard Code. The real difference is getting around the

time constraints on open procurement. If we just advertise in

Commerce Business Daily, it is going to take weeks and weeks.

If we go to the list we can cut that time. Those people

who are selected from the list are treated like any procurement

process, except when the returns come back. This means that if

ten people were solicited communications would go on with ten

people. Or at least they should.

QUESTION - DR. KRUEGER: "Do your concerns, relative

to Government competition, require legislation principally, or

would action by the Executive Branch be adequate?"

DR. KRUEGER: Action by the Executive Branch would be

adequate. That is, certainly an Executive Order in OMB stating

substantial changes to A-76 along the lines of the earlier BOB

documents, but particularly along the lines of the minority

opinion of the Commission on Procurement, would make great

changes in the conduct of the Government.

QUESTION - DR. WATERMAN: "I understood you to say that

the Navy is trying to increase the use of price competition in

processing professional services. If my understanding is

correct, why do you feel this to be in the best interests of the

Navy?"

DR. WATERMAN: I guess I was not quoted very accurately.

I did not say that we are trying to devote more efforts towards

competitive bidding. I think the important thing is that the

best bidder should get the job if he is the most qualified.

QUESTION - JOHN MORIARTY: "Is it worth the bother for

us to fill out the very complex pre-qualif ied bidders* list? In

other words, how many professional services dollars does the

Technical Analysis Division propose to contract outside in a year ?"

MR. MORIARTY: As I said at the outset, TAD • s role,

or I should say its mission, is to try to develop working models

to somehow bridge the "thin film" area that Dr. Cushen was

talking about. In this case it happened to be a procurement

question. The model is intended primarily to bridge this "film"

as opposed to having us being the Government procurement agency.

TAD would like to get working models established in other agencies

96
QUESTION - MR. BOND: "Is there a vast volume of illegal

sole-source consulting going on? If this is so, can a legal

case be made? It is generally agreed that once an RFP appears

in the Commerce Business Daily, it is already too late to

bother .

MR. BOND: I have not made any survey, but I am trying

to show that one of them right now is illegal. There is one

sole-source procurement contract in HUD where we are protesting.

There seems to be a tendency in the civilian agencies

of Government to go through a sole-source procedure without as

much care and attention to justification as there is in the

Department of Defense. When Defense does it they do a better

job because they are more used to doing it.

In the Department of Defense they have more experience.

So 1 e- sour c ing itself is not illegal and it probably never will be

illegal. However, you can see, if you look at the regulations,

the procedures, and the justifications, a less than fullydeveloped approach in the civilian agencies, whereas DOD usually

puts in more care.

The Federal Procurement Regulations are not as

elaborate as the ASPER's are on sole source. Not as many

criteria are set forth for sole-sourcing in the FPR as there are

in the ASPER. In the military, departments implement the ASPER's

with some of their own regulations.

DR. KRUEGER: I would like to comment on some aspects

of that question.

Certainly there is nothing illegal. There are several

layers of sole-source contracting. Some are the kinds that any

private organization can get on the basis of a justification of

uniqueness. But there is the sole-source that special agencies

use namely: Federal Contract Research Centers or other types

of not - f or-prof it s , where procurement regulations make specific

exception and say it is all right without any justification of

uniqueness

Here it is all right, but we believe the rules should

be changed.

QUESTION - DR. KRUEGER: "What should be the basis

for determining whether professional services should be

accomplished in-house or by contract?"

DR. KRUEGER: Basically, the principle enunciated in

the minority report of the Commission is as follows: if there

exists in the private sector sufficient competitive resources,

not a single one, then the matter should be let to contract.

97
There are certain possible exceptions that may be

made with respect to some aspects of military work having to do

with intimate conduct of a war, and other aspects which are

proper. I do believe the current A-76 gives the military more

excuses than they need relative to secrecy and other factors.

For example, security is an area where a private

organization can be just as dependable as an in-house group

or as a not-for-profit.

QUESTION - JOHN MORI ARTY : "How does one obtain the

pre-qual if ied questionnaire of the National Bureau of Standards?

What is the agency and address? What is the procedure for

updating a consultant's file under your new system? Anytime the

consultant wishes, in response to specific inquiry, or upon

periodic call from you?"

MR. MORIARTY: In answer to the first question, to get

the forms you address your letter to Mr. John Moriarty, National

Bureau of Standards, Technical Analysis Division, Room A166,

Building 225, Washington, D.C. 20234. Or, one can call

(301) 921-3565.

In answer to the second question, we take updates anytime during the year once the system goes into effect. We will

advertise every six months. At that time you can update or you

can update it anytime in between.

As a matter of fact, we can meet with you and show you

what is in your file. We have already had occasions in which

companies changed administrations. This change occurred over a period of a year, so we showed them what they had sent us, and

they updated from there.

There are no restrictions on updating at all.

QUESTION - MR. BOND: "Can you comment on the recent

actions of the Justice Department against professional trade

groups and their non - compet i t ive canons or ethics?

"What effect on the procurement process regarding

professional services do you foresee?"

MR. BOND: There are certainly two different questions

there; the first one relates to the action which the Antitrust

Division of the Justice Department has taken in suing certain

professional groups. I have not been closely connected with

those, but they seem to be doing a little bit of picking and

choosing and not suing all. The responses from the trade

associations have varied also; some have capitulated and

immediately entered into negotiations for a consent order, and

others appear to be more interested in fighting.

98
In answer to the second question, I do not think the

Justice Department actions are really related to Federal

procurement relationships with the companies of these various

associations

I think they relate to the provisions in the charters

and by-laws of these organizations which they are alleging to

violate the Sherman Act. The Justice Department says that they

are basically setting prices.

I do not think they are talking about collusive bidding

on Government contracts. I do not think there will be any

direct impact from the suits on Government procurement.

Indirectly, I suppose there could be some, to the

extent that these professional service associations change their

pricing practices as a result of entering into consent orders.

Their pricing practices with regard to the Federal Government

will have to be consistent with those, but the attack the

Justice Department is making does not go to collusive bidding

practices, not on Government contracts.

QUESTION - DR. KRUEGER: "Most non-profits find grants

an undesirable procurement form compared with contracts. Grants

provide no fee and may require cost - sharing , yet there are many

legitimate costs such as interest or the purchase of equipment,

which must be paid from fees. I feel most non-profit organizations would support your effort to convert grants into contracts."

DR. KRUEGER: I certainly favor the end result

espoused by the question. However, the fact that the grant

process is still in use to a high degree makes me believe that

a lot of people do not look at them as badly as you do. I hope

more people like you, for reasons other than mine, are against

grants so that open competitive contracts can exist.

QUESTION - MR. BOND: "You stated that the GAO decides

only ten percent of bid protests in favor of the protester. Does

this imply that all protests have an equally valid basis? What

percentage of bid protests concerned formally advertised

procurements, and how does this relate to contracts for

professional services, which are essentially all negotiated

contracts?"

MR. BOND: First I will answer the question pertaining

to how many protests related to formally advertised procurements.

Historically, more protests have been filed on IFP's

than RFP's or RFQ's. However, the GAO has, in more recent

years, taken a more active role in the questions arising out

of negotiated procurements, questions such as, what is the

proper competitive range, and the whole question of what kind of

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criteria should be set forth in RFP's, also questions such as

what is a specification common to all bidders or offerors, and

whether or not the RFP should set forth the weights specifically

for the different criteria.

By no means does the GAO feel disinclined to hear

protests on negotiated procurements. They are very interested.

I think the third question can be answered by saying

that as far as professional services industry procurements go,

which are mostly negotiated, an avenue is available as a remedy

in the event there is a valid basis for complaint.

The fact that 90 percent of the protests are denied

does not mean that the protests are invalid. Some of them have

a thinner base for complaint than others. There is a variety of

reasons why they are denied. Often a protest is filed after a contract is awarded, and that is a futile gesture because the

GAO has historically been concerned about:

"What if we agree with the person protesting?

What do we do? The contract has already been

awarded; we do not want to cancel a contract and

then expose the Government to a breach of contract

suit for damages by the company that won the job."

That is why it is always wise, if you have a basis for

protest, to get it in prior to the award being made.

Some of my earlier remarks might possibly have been

misinterpreted. The GAO is taking a little stronger approach to

protests now than it did two years ago. This is because there

are some changes in the staff. But on the other hand, it is

still a relatively effective remedy. If you are in the

protester's seat, and you have gotten the GAO to go along with

your view of the issues, you still may not get any effective

relief because the Comptroller General has a history of usually

just "spanking" procurement agencies on the wrist and saying:

"Now, that was wrong; we agree with the

protester, we do not think it should be done

that way, we think they have a valid complaint,

and make sure you correct your procurement

actions in the future."

What would that do for the protester, as far as it goes

Nothing. In a couple of cases, they have actually recommended

to the procurement agencies that a contract awarded improperly

be terminated for convenience, and I think that is what they

should do. I think they have been a little more aggressive in

the last couple of years, but on balance, they are still too

timid

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QUESTION - JOHN MORI ARTY : "How many contracts are

necessary each year to justify your new system? Would it be

worthwhile if you had, say ten or fewer a year?"

MR. MORIARTY: The answer is yes. We have no limitations on contracts, either on how many we are going to award to

have you in the system, or how many you have to have had prior

completions on to get on the system.

QUESTION - JOHN MORIARTY: "My firm has BOA's with OMB

and Department of Transportation. Why doesn't the Government get

together on procurement procedures?

"Do you anticipate that the system which you describe

will be used by agencies other than the National Bureau of

Standards?"

MR. MORIARTY: The idea is that TAD develops a model

and then we try to install the model in other Government agencies

or departments. I guess the answer to the first question is yes,

we are very hopeful that we can get it in use on a much wider basis

than in our Division.

We have talked with other people in other agencies. We

are negotiating with people down at Commerce at the present time

to have it installed as a Commerce-wide system.

As far as other agencies go, TAD of course being a member of the Bureau of Standards is also constrained to what

Commerce does. If you introduce other departments of Government,

then it becomes a whole new ballgame.

At this point we have not done anything past Commerce,

we are strictly limited to our own agencies and departments.

QUESTION - MR. BOND: "You recommend getting your

protest in before the contract is awarded, but in general the

contract has been awarded before the need for protest is

apparent .

MR. BOND: That is a common problem in negotiated

procurements where you do not really know what is going on. There

are no requirements for the Contracting Officer in the very

delicate phase prior to awarding a contract after proposals

are in and he is making his evaluation. He has to be very

careful that he does not tell you too much. It is the Government's

business as to whom they want to award a contract to and you

normally have to be very sensitive to what one thinks the RFP

calls for, what you think the relative competitive situation is,

what the requirements are for Government action during the

evaluation phase, and you want to collect as much update information as you can as to what is going on. There is no other way

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to do it and if you think that things are going on which are

going to be improper or can act to your own company's detriment,

that is when you have to protest.

You often have to file protests not having the real

view of exactly what has happened. I am not encouraging people

to simply protest with no basis, but there are ways to know. It

seems, for example, in the negotiated procurements there is always

a marketing team running all over Government collecting industrial

intelligence as to prices. Everybody seems to know what everybody

else's price is, even though officially they do not know.

If that is the case, if you think you are low bidder,

and you have the best technical proposal, and there is no reason

for your company not to get the award, and yet you are not going

to get it and that is completely a mystery to you, maybe the

best thing to do is protest before the award is made.

I want to say that I talked about pre-contract remedies

and contract remedies. I have not had any questions about

contract remedies. I have not had any questions about how you

structure your business to properly perform the contract, how you

can proceed to perform the contract properly and also get the

right cost recovery under the contract.

Contract remedies are the areas which I think are much

more meaningful to companies than the pre-contract remedies.

The reason there are so many protests is because people

compete so vigorously for these contracts that they get emotional

about them and feel that they have to have the business. Once

they get the business they do not pay enough attention to what is

available for recovering excess costs and so forth. These are the

areas which can be a lot more meaningful to a company than

fighting over who is getting the contract.

QUESTION - MR. BOND: "You indicated that Boards of

Contract Appeals are generally objective tribunals. I believe

this is consistent with their transformation into quasi- judicial

forums rather than as agents of the Executive Department. A

quasi- j udicial forum, it is generally equivalent to a court of

original jurisdiction. What is so inequitable for the

Government to request a review or appeal of the BCA decision on

a matter of law?"

MR. BOND: I think where the inequity comes in is this:

the contractor has given up something when he signs the contract.

He has given up the right to go in and sue for breach of contract

in court. In return for that, I feel that once he has exhausted

the administrative process, and the decision is in his favor by

the procurement agency he is entitled to rely on that and not

have to go further.

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Once a Contracting Officer has ruled in favor of the

contractor, or the Board of Contract Appeals has reversed the

Contracting Officer's decision against a contractor and ruled in

favor of the contractor, usually several months, if not years,

have passed. And this all stems from the Disputes Clause in

the contract in the first place; it is part of the bargain.

So the rationale is the same rationale that the Supreme

Court used in the S&E Case. I think that if a contractor is

giving up his normal commercial common-law rights to sue for

breach of contract, and has accepted an administrative remedy,

via the Disputes Clause, that he is entitled to the benefit of

his bargain.

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PANEL THREE: MANAGING THE PROJECT

GOVERNMENT PROJECT MANAGEMENT

Mr. T. Fred Noble

Technical Consultant

National Information Systems Corporation

Arlington, Virginia

I HAVE EXPERIENCE PRIMARILY IN THE PROCUREMENT ASPECTS

OF DATA PROCESSING.

A BOA for Systems Analysts

One of the things that we recently did at GSA was to

develop a Basic Ordering Agreement for systems analysts and

programmers, in which job descriptions were defined for a systems

analyst. Everybody in the country knew what we were talking

about, industry as well as Government. When we said: "Do you

have a systems analyst?" the answer was: "We either have a systems analyst or we do not."

This program exists. There are about 90 companies on

the Basic Ordering Agreement for System-s Analysts and Programmers.

At GSA the system is already in effect and is being evaluated.

Eighty companies have already received business under this Basic

Ordering Agreement.

Ten Well-Defined Job Descriptions

What is this all about? The Basic Ordering Agreement

for Systems Analysts and Programmers, and software development

includes ten well-defined but brief and concise job descriptions

for various skills in the data processing area.

When we started out there were 50 responses to an RFP

for a Basic Ordering Agreement. The one thing that GSA has is

the responsibility for centralized procurement for data processing,

hardware, including software. Recent regulations have required

that all Federal agencies come to GSA with the requirements that

they have for proprietary software packages.

I have given presentations as a Government representative

to the data processing arm of the Secretary of Navy's Office,

the Secretary of Army's Office, Department of Defense and most

civil agencies. To my knowledge most agencies are familiar with

the Basic Ordering Agreement for Systems Analysts and Programmers.

107
The State of Israel, Japan and 300 higher educational

institutions are familiar with the Basic Ordering Agreement for

Systems Analysts and Programmers. It has been found to be usable

to the tune of $4 million dollars a year.

How the BOA Works

How does it work? First, anybody can get an RFP from

the Business Service Center at GSA, GSA Region 3, Zip Code 20407.

The title is: Basic Ordering Agreement for Systems Analysts and

Programmers. It defines the scope of the contract. Eleven

different areas are covered, and ten different job descriptions

for the services to be performed.

Those job descriptions were established on the basis

of the Civil Service standards, and all companies that have

submitted information to various Government agencies, from

Basic Ordering Agreements and from contracts that have been

issued by OMB and the National Science Foundation. Computer World

has had many articles about the Basic Ordering Agreement.

National Information Systems has recently requested

from the General Services Administration that the Basic Ordering

Agreement be expanded to computer time or that a new Basic

Ordering Agreement be established for computer time. A new

Basic Ordering Agreement has also been requested for Computer

Output Microfilm. I also think that there are many, many other

areas where the Basic Ordering Agreement may be used.

You all know that there are human resource pools in

the Federal Government that are in use by many Federal agencies

in which the agencies get their programming and systems analysis

accomplished by a Government source. These pools are in

existence in many GSA Regional Offices around the country.

I have asked the question, has A-76 been really analyzed

by industry? I believe you will find that A-76 states that new

starts will not be attempted by the Federal Government until it

has been proven that they will do the work for less than a contractor. That is in the existing A-76. Has that point ever

been challenged?

Do you know that there are Federal Data Processing

Centers in most every region? The National Bureau of Standards

assists many Federal agencies. I was very much involved on the

original Ed Dwyer staff of the ADP coordination function on

implementation of Public Law 89-306. I was a broker for every

Federal agency to see whether or not there was computer time or

systems analysts in the Government available, before a company

went commercial.

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Is Government really more economical than industry?

Nobody really knows. But somebody had better find out if

Government and business are to coexist. We all say we know what

the overhead is, but I wonder if you know what the overhead of

NBS is?

1,000,000 Hours of Unused Computer Each Month!

The law says that many agencies will support other

agencies if they have excess computer time. How much computer

time is available as unused in the Federal Government on a monthly basis? The answer based on the latest management information systems statistics is about a million hours a month of

computer time.

Has anybody here tried to buy that excess computer

time? How would you like to have some of this unused computer

time? It is excess property, is it not? You can go out and buy

an excess desk or what have you; has anybody tried to buy excess

computer time? Once it is gone, it is gone.

Project management. I am not so sure that we can talk

about specifics in project management. My own opinion is that we

have to talk about the whole "umbrella." We have to talk about

the dirty mess that we are involved in, both in industry and

Government, before we can really say we are doing a good or bad

j ob

I know many fine project managers, industry-wise and

Government-wise. I know a lot of the problems. Many of the

problems are caused by turnover.

Primarily, most everybody wants to do a good job. I do not think there is anybody who wants to do a bad job. But one

of the big problems of project management is just the fact that

somebody did not know what they wanted in the startup in the first

place. Nobody could really manage a project under those

circumstances

One of the big things that faces all of us is getting

the loose ends tied together.

109
MANAGING THE PRIVATE CONTRACTOR

Mr. Richard A. Walbrecker

Vice President, Program Development

Alan M. Voorhees and Associates, Inc.

McLean, Virginia

THE FIRST # THING ABOUT THE PRIVATE CONTRACTOR THAT I WOULD LIKE TO GET ACROSS is that profit is a cost of doing

business. It is not a luxury. It is not what is left over.

We have to manage a private contractor to make a profit. We

have to convince those people with whom we deal in the Federal

Government that profit is not a luxury. It is not particularly

a reward. It is a cost, just like overhead is a cost.

Let me say something more about the private contractor.

We are transportation and urban planners. We have about

250 people, 160 professionals in our group. We are located in

17 offices in this country and five overseas. To give you a better view of the position from which I speak; we do about

25 percent of our total work with the Federal Government, about

25 percent with private industry, and 50 percent with local and

state governments.

Of this, our contractual breakdown is 60 percent CPFF;

the remaining 40 percent is split between time, materials, and

fixed-price contracts.

I would like to trace a project from the RFQ through to

the RFP, contract negotiations, managing the contract, and

finally, what I would like to call "Federal evaluation" of the

contractor

I was pleased to hear Mr. Moriarty talk about RFQ's

and pre-qual if ication . All of us have been spending too much

money and time chasing things we should not chase. We have

spent too much time being concerned about why we did not get it,

insisting on debriefings, going after projects that should not

have been sought.

We feel that an RFQ is the way to do business for the

Federal Government. Perhaps we could get quicker response to

our proposals if they did not have 50 to read, but we are

limiting it to five or six qualified contractors for each

proposal

Take as an example a situation that has happened many

times in the past. A contract worth $200,000 has 40 proposals

submitted on it. Let us say we go from one to two and a half

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percent, as the cost of proposing. That would be somewhere

between $2,000 to $5,000 that each contractor would spend to

submit

The cost to the Government, on an average of $3,000

would be $120,000, chasing a $200,000 project. That is sort of

ridiculous, isn't it.?

First Step: Evaluate the RFQ

Our procedures, in trying to see that we make profit is

to first evaluate as best we can the RFQ when it comes out. We

try to get a feel for just what is going on in the minds of the

people who want this job. What is behind it? What is not

written? That is not because it was not written purposefully.

We are looking for what was not said about what is being looked

for in this job.

We try to see if there is a need for a team. We are

increasingly getting into teaming on proposals, because the

range of skills necessary for most of these proposals is far

beyond that which is held within any one company.

We submit our qualifications and we are pleased if

we ar e " short - 1 i s ted ," bee aus e we know our chances are at least

one out of five or six. That is not a bad investment.

Second: Evaluate the Competition

We would like to know who is the competition. We think

we should be told. We think it is important. We think that if

you know your competition you can develop the strategy for

winning

Third: A Briefing by the Technical Manager

If there is not a formal briefing offered we proceed

to get a briefing from the technical manager. At that point a decision is made. The proposals manager, who in most cases will

be the project manager for the job, must fill out a form. It

is a Proposal Request Number Form.

The Proposal Request Number Form: A Thorough Analysis

This form insists that prior to his getting a proposal

number, he knows: the competition, the value of the contract,

has a good estimate as to when it will start, has met with the

technical manager for the Federal agency, has a budget for what

it is going to cost him to write that proposal or negotiate that

contract

Ill
This is all done before approval is given to go after

that proposal. Then a number is assigned just as if it were a job number and all time is logged to that proposal number,

printing costs, travel costs, et cetera.

We find this is the only possible way we can control

our budget

Suggestions for Improved Government Service

What would we ask of the Federal Government in regard

to proposals? We would ask that they respond more quickly, so that we do not have to go through the estimate of early start,

likely start or late start.

As many of you know, in many cases it has been as long

as one year from selection to the start of a contract. The

Government is not getting the best that was offered. If they

are, it is by chance, because we cannot keep people waiting for

a project to start.

In contract negotiations, we have a Contracts Officer

who is familiar with the processes and he generally negotiates

at his peer level with the Contracting Officer for the Federal

Government. It is very possible that in earlier stages of

selection, our technical people or our proposal manager, were

down to discuss some of the finite parts of our proposal and how

they related to the RFP. When this is out of the way price

negotiation begins.

We have seen the practice of negotiating concurrently

with two or more people in the Federal Government. We think it

is a waste of time. We think the amount of pressure that is put

on the contractor is unreal. We also feel that the results are

underbidding and overruns on jobs. which are basically in no one's

interest

Negotiation should be a case of two intelligent

negotiators getting together and knowing each other's business,

so that you do not have to go through concurrent negotiations

in order to feel absolutely positive someone was not "had."

We also recognize the statutory limit of ten percent

on CPFF contracts, but that is based on the sharing of risks.

With cost limitations as they are now put on CPFF contracts,

we do not see a sharing of risk anymore. We also do not see any

reason for a statutory limit of ten percent on these kinds of

contracts

Essentially, the "cost price-fixed fee" contracts

that many of us are being met with today in the Federal

112
Government are not cost-price-fixed fee at all. They are

essentially fixed-price contracts, at a ten percent or lower rate

of profit. We would like to suggest that it would be in the best

interests of the Federal Government to change this practice.

Now to the point of implementing and controlling the

project as a private contractor.

Monthly Cost Review

Each project manager has a monthly administrative and

cost control review and a monthly technical review. It must be

done on every project. We find that this review alerts us early

enough to the problems that he is facing with his client.

Basically project managers are reluctant to tell their top

management of their problems much like many mayors of cities

consider that all problems will just go away if ignored.

We try to find out if there is a client problem and

get our project manager to admit it through a technical review.

We have monthly data available to him as to the cost

he has incurred on his project. We review his completion

estimates, because they relate to the monthly profit that is

shown on that job. If you do not review them and then you try

to discuss them thoroughly with the project manager his basic

incentive is to keep management off his back and to show a favorable completion rate with what he has spent. If this occurs

the only time you catch him is at the end of the project, that

very last month. Then all of a sudden the job becomes a loss.

Suggestions to Federal Contract Managers

What would we say to the Federal Government contract

managers or project managers as suggestions for how to work

appropriately with private contractors? First, understand the

project. Know what you are after. Please do not force favors,

do not get a project manager in a bind by saying: "Gee, I would

just like you to do this little thing for me." Because he figures

he should, it is an investment. What is latent in that kind of a suggestion is that "you will get your money faster and we will do

something for you later in the project." It should not be done.

Follow the project, as the contract is written, and if

not, revise it. If you as a Government project manager want

something else done, pay the man for it. That is why you paid

him in the first place, because you considered he had some

knowledge you wanted and could do some work you wanted. But do

not pressure the man.

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We would like to suggest that you review promptly. It

costs us a lot of money to have jobs delayed because we do not

get prompt reviews of drafts or interim reports. This happens

frequently. Do not delay the project unless it is absolutely

mandatory. I do not mean delaying it through project reviews,

but the project manager for the Federal Government should be our

"friend in court." If for some bureaucratic reason they said:

"Let us stop that job for a few months," you just have to imagine

what that cost to a contractor is to stop and then try to start

it up again. Realize his side of the problem. As the Government's proposal or project manager be his friend in court.

As a Federal employee dealing with a private contractor,

please assist him in timely payments. Our payment received cycle

right now is about four months from invoice to payment. That is

too long. It is costly for everyone. It is not good business.

Finally, I would like to suggest that there be a process of evaluation at the end of the contract. It would help

in the selection process on the next job, for qualification

processes, if there could be some meaningful method of sitting

down with a contractor, the project manager for the private

contractor and his superior, and going over the project. What

happened during the job, the satisfaction or the dissatisfaction,

methods of improving your performance on the next one, would all

be subjects during this review.

I suggest that these things are not just meant to make

it easier for the private contractor. They are meant to allow

him to do the job professionally that he is in this business to

do. They are meant to allow him to do it at a profit, which I will remind you is a cost of doing business.

114
MANAGING THE UNIVERSITY RESEARCH TEAM

Dr. Robert P. Boynton

Dean for Graduate Studies and Research

The American University

Washington, D.C.

I WOULD LIKE TO BEGIN BY SAYING "AMEN" TO THE last

presentation

That was almost a textbook presentation. Unfortunately,

there are too few textbooks on this subject so you are to be

congratulated on both the clarity with which it was expressed

and the pleas that were made. Most of your points are applicable

to universities

I say most because you began and ended with the statement that profit is the cost of doing business. Unfortunately

we have to absorb that cost. I also know that there are some

others in the room who absorb profit as well.

I want to address my remarks today primarily to the

unique characteristics of university research. I am going to do

that by creating a caricature. My remarks do not describe any

particular university. They are meant to describe the problems

faced by universities.

I offer these remarks to you first because I recognize

that many of you are our competitors. Although many of you know

a good deal about the inside of university research, some of you

have seen us only as competitors.

A New Mode of Collaboration

I offer these remarks to you because I know many of you

are our potential collaborators. Increasingly there is a new

mode of collaboration, not only between universities and other

not-for-profit agencies, but between universities and for-profit

groups. We are presently engaged in responding to a request for

proposal that involves us with a for-profit organization. It is

my first experience in this area. I do not know whether it will

work, but I am finding it fascinating.

I also offer these remarks to you because I know that

in your heart of hearts, some of you wish you were in the

university setting. I want to warn you off a bit. At any rate

I would like to open your eyes before you jump in.

I suspect the perceived advantages of the university

setting are essentially two.

115
The first one is the problem of fiscal responsibility.

Thanks to tuitions we have that problem sewed up. The American

University having been in business for some 80 years and not

having gone bankrupt, we have quite a track record.

Related to this is the question of cash flow.

Universities are in pretty good cash-flow positions. This is

the other thing that makes them terribly attractive, particularly

to other not-for-profit organizations.

There is also the prestige. Isn't it a strange thing,

at least as viewed from the inside, that the least of all

prestigious universities somehow have, in the research area, the

equivalent kind of external prestige as all but the top four or

five independent research firms? Again a false image, but one

that sometimes looks very attractive when you do not have it.

I would like to create a caricature of those elements

and problems which are relatively common to the university

experience, and are less common in other research climates.

Problems of University Research

There are a number of considerations which in some

measure appear common to all university research. I might begin

by pointing out that it takes a certain amount of courage to get

up here and talk about university research. There are many forms

and many organizations for it, and as many arrangements as is

imaginable. It is not a unified endeavor. It is one that varies

from the MIT's of this world down to the smaller schools. It also

is handled in a great many different ways.

Education: The Primary Function Not Research

However, they all have at least one thing in common.

With few exceptions, research is a primary function of a university

that is, how we distinguish the university from the undergraduate

research institution. But it is not the principal function of

the university. Education and learning holds a position with

which the research function cannot compete. Research can only

complement education, it cannot successfully compete with it.

In addition, universities are essentially non -per f ormance

and non - eva lua t ion oriented. The manager of university research

has to operate in that environment.

The third thing I would like to say is that the art

of management is as primitive in the higher education setting

as it is in any enterprise in contemporary Western culture.

These three conditions provide the unique challenge

116
for the university research manager. We all recognize the

commonplace formulation that the university's social goals are

education, research and public service. An expected assumption

follows from this formula: that all elements in this core are

fundamentally co-equal; education, research and public service.

Such, however, is not the case. The principal

functions of almost all universities, public and private, are

education, the learning process, and most importantly, its

cert if icat ion

Research and community service are accepted as uneasy

partners only so long as the pursuit of these goals does not

hamper the pursuit of education and the manifold steps that lead

to the certification of the educated. This means:

1. Research is best which does not interfere with

classes or faculty office hours devoted to

students

2. That research which involves students is

better than research which does not involve

students

3. That research is good when it brings monies

into the educational system.

Those are the three conditions under which universities

prefer to do research.

There abounds in all universities the myth that research

and teaching commitments are antithetical. It is simply a fact of

life, wherever you go, be it Princeton, MIT, Berkeley, TAU

,

Georgetown or Montgomery College. You will find the student body

thoroughly believes that one reason it cannot get to its faculty

is because they are deeply engaged in research. This myth is

prevalent in those institutions where research is very difficult

to locate

It is part of the rhetoric of faculty and student

politics. Its assumed truth is often used as a justification

for one form of retreat from the evaluation system on the part

of the faculty, students, and administration.

Judgment No Longer Proper Evaluation in Universities

The universities in the United States have taken great

pride in the standards upon which they evaluate both their

colleagues and their students. However, a rather interesting

thing is happening in universities. Many of us who have been out

of the university system for some time do not realize the degree

117
to which universities are no longer considering judgment

evaluation as appropriate behavior.

Instead, universities are tending to become, in some

rather interesting ways, remedial and therapeutic. This posture

extends not only to the students, but to the colleagues, the

staff and the whole university system. This means that the

university is not in a very good position to be an evaluator of

the research contract situation in which it finds itself. It

takes heroic and sometimes extraordinary efforts to engage in

evaluat ion

.

University Departments Are Loathe to Judge Research Quality

The university as a therapeutic system is not the only

source of evaluation which has crept into contemporary institutions of higher education and thereby created problems for research

management. Pure science demands a latitude of independence from

institutions in order to remain true to the dictates of its

paradigm. All such scientific enterprises, viewed in a certain

light, can be seen as pure science.

The source of that light, in the university setting, is

an organization called a "department," a collection of scholars

and students focusing upon a single discipline. That organization,

the department, both defines and judges research. And as I have

suggested, it has become less and less judgmental.

Departments, however, are really very loathe to

actually judge research. The reason is professionalism. If

research is demanded as a part of the personnel selection process,

it is better judged by pages and pounds than by impact or by

innate quality. It is a simple matter of professional courtesy

not to look too closely at the work of specialists.

Therapy, science and professionalism, by themselves,

do not account completely for the non-evaluative character of

contemporary universities. Our habits of behavior have been, or

are in large measure the result of having lived in a rather

affluent society for a period of two decades. Their impact has

been made more intense by the relatively higher level of resource

allocation and demands placed upon institutions of higher education for the last two decades. You did not evaluate, regulate or

control individuals or the research projects because you did not

want to lose them. You do not want to lose the researchers at a time when society is making great demands on you. Society is

no longer making the same demands on universities.

Management: A Primitive Art in Universities

The last point that I would like to make is the

118
relatively primitive state of the art of management in

universities, It is primitive at least as compared to the

levels of technology in application attained by industry,

Government and other public enterprises.

The reason for the underdeveloped nature of higher

educational administration is not hard to find. The management

of educational enterprises is most legitimate when it is least

technical or professional. That is, management by professors,

and sometimes by students collectively, or by delegation to a colleague, is the only legitimate form of academic management.

I am a Dean for Graduate Studies and Research, a management position. I am a Dean for Graduate Studies and

Research because before that I was a full professor on tenure.

I made my credentials as an academic. What that has to do with

my capacity to manage, nobody has quite ever pointed out to me.

Such management should be severely limited, according

to the academic tradition, both in its ability to initiate

action, to utilize resources or to evaluate the academic

enterprise, including research.

I have overstated these three conditions of academic

research management in order to highlight the differences that

exist among the various participants in the "national research

partnership" and to focus on critical considerations affecting

university performance.

I am not suggesting that whatever shortcomings exist

within the academic community need to be tolerated forever by

the other partners in a situation as a price for doing business

with us. Some problems can and will be remedied; others can

or have been modified. A critical consideration that affects

the management of university research teams is that individual

researchers tend to have additional primary obligations in

non-research related organizational homes.

Increased Responsibilities of Faculty Inhibits Research

Research management must compete with other university

activities for the time and talents of the researcher. The

demands upon the faculty researcher's time are increasing rather

than decreasing within the university system. They are

increasing because of the democratic governments of universities

these days; i.e., the amount of time spent by'the average

faculty member in committee would result in the development of

at least 450 new journals.

There are degrees of organizational isolation, varying

from slight separation to complete lack of contact and/or

119
sympathy, separating researchers routed in different disciplines

or colleges. The problems of mul t id i sc ip 1 inary research in the

normal setting in universities are horrendous.

The bridging of these organizational gaps can cause

traumas to the roots of organizational arrangements; that is, to

the disciplinary control over the activities of its members. The

easy way out, and the way that most universities have taken, is

to create separate research entities that meet the needs of the

contractors and do not disrupt the on-going process of the

department

.

This is an easy way out. All of us who have any

relationship with the universities, and I govern several of these

institutions, are familiar with this.

This is the easy way out

taken. The disadvantages of going

real as are its obvious management

, and it is a route most often

this route, however, are as advantages

.

Disadvantages of Special University Research Organizations

In the first place, it separates the researcher from

the classroom and the classroom from the researcher.

Second, it can and often does break the stil 1 -honored

model of the scholar-researcher-student relationship.

Third, it separates the researcher from his colleagues,

creating a research agency often housed off campus.

It limits the researcher's interactions with his

natural peers on the campus to his occasional trips to the

Faculty Club.

Fourth, it places universities directly in the notfor-profit research business, where in order for the now-isolated

facility to stay alive, the university must compete with

established research and consulting agencies in a marketplace

designed for them and not for the university. Once separated

from the hard monies of academia, university research organizations at the point of decline of funding act very much like any

other organization under attack and attempting to stay alive.

They will often grasp at straws to stay alive. In doing so they

will come into direct conflict with the fiscal managers of the

university. That is, they will begin to behave like the

independent consultant who, in order to maintain himself, puts

in response to RFP's he has no business dealing with in the

first place. Universities do this all the time. They start

getting into the cost-fixed-price business. Universities have

very little business in that area.

12 0
Fifth, the individualistic and collegial mores of the

university community make it difficult for any central university

agency, such as the Office of Vice President for Research, or

the Dean for Graduate Studies and Research in my case, to

effectively monitor the research performance at the departmental

level at any point prior to the completion of the project. Even

at this point monitoring is limited by convention to that of

noting whether the obligations have been met. Very little can be

done by way of judgment of quality.

Sixth, another consideration is that management

information systems at most universities are inadequate to

meet the needs of day-by-day operation. The management research

system is grossly inadequate to meet the requirements of long-term

research planning and development by universities. This means

that most universities are at the present moment going at it

blind.

The information systems at universities reflect the

decentralized character of these enterprises. Where such systems

exist they are geared to the primary needs of the system, to

produce certified graduates (the Registrar's office), to collect

income from the process of certification (the Treasurer's

office)

This is a correctable problem. It is nevertheless the

state of the art within the university.

Seventh, the determination of university overhead rates

and their relevance to the university's research enterprise is a political question, outside the university system, with the

Government, and within the university system as well. The

answers to this political question affect the university's

ability or willingness to engage in contract research.

You must remember that in most cases, engaging in

contract research is done because of two conditions in the

university. There are researchers within the university

community who seek this kind of professional fulfillment, and

also it provides a margin of comfortable living for the

university. It is one of the elements that decreases the

private university's dependency on tuitions.

Most universities have huge overhead as replacement

costs for services expended in contract administration. It is

very difficult to ever trace the relationship between the

overhead that comes in and the generation of research that goes

on

The funds, however, seldom find their way to the level

where the original costs were accrued. Research groups, teaching

units and individual researchers need development monies, and

121
this kind of risk money is rarely more than a very thin trickle

in any university setting.

This brief statement suggests most of the problem areas

in university research management. It has not focused attention

upon the decline of some of the more traditional resources of

university research support, nor the shift in research monies

to new areas of national concern. My paper clearly overstates

the problem areas and the current conditions in order to

dramatize the unique problems of getting into bed with the

university in the research enterprise.

A Decrease in Universities Doing Research

At the present moment, universities are in a period of

adjustment. They are reflecting upon their needs and society's

needs in the future. I will predict a simple outcome that should

be of interest to you as partners in the research enterprise.

There will be fewer universities and colleges in the future that

will actively engage in research. The glamor has gone out of

research. The soft monies that never hardened have left a great

many universities in dire straits. A great many of the state

universities that began the model of moving in research

enterprise situations are now backing off because of the

tremendous demands that are being placed on them as educational

enterprises quite apart from the research enterprises.

This does not mean that universities will not continue

to compete at the point' of grants and other areas where a single

principal contractor or single principal investigator can deal

with the Government directly. It does mean that a great many

universities are not going to take any organized efforts to move

deeper into the research field.

I think we will find over the next few years, in the

university research market, that there is going to be an

increasing classification of universities as graduate, or as universities that appeal more to the needs of the local market,

to the educational process, and to those graduate and professional

fields which can be accomplished without any great research

enterprise.

The ones that continue will be better equipped to

provide the research services that are needed. They will be

much more competitive, both with the for-profit and with the

other not-for-profit groups.

I wish I could say at this moment that the state of the

art in universities follows the model that was set out for us by

Mr. Walbrecker. It is a significant model. It is one that we

all think and dream about. However, it is one that at the

present moment we are unable to enforce.

122
PANEL DISCUSSION, QUESTIONS, AND COMMENTS

PANEL THREE: DEVELOPMENT OF THE PROBLEM

QUESTION - MR. WALBRECKER: "How can Government improve

its specification of services?"

MR. WALBRECKER: I would hope that more definitive work

statements could be written for RFP's. We find many cases where

there are three pages of description of the work statement and

the job to be achieved, for as much as two and a half man-years

of effort.

We think that one of the motivations for this is to not

explain it fully so as to create ingenious responses. I do not

think that is the case most of the time. I think it has not

been that well thought out.

We have seen some that apparently looked like the

supervisor of the department came by and said: "Haven't you got

that RFP out yet?" Responding to this they submitted what was

ready

! We think that if work statements could be more clearly

defined, better thought out, discussed with some consultants,

perhaps, before they go out, there might be an opportunity to

develop some fixed-price contracts. There might be an opportunity

to get us away from the cost-plus-fixed-fee which basically is a sharing of risk.

QUESTION - MR. NOBLE: "If by a systems analyst you

mean a computer systems analyst, I can understand that he can be

adequately defined. If, however, you refer to the broader type

of systems analyst, I would like to hear either you or someone

else define him." In this area I was talking in terms of

computer systems analysts.

MR. MORI ARTY : I think the question was: "Can you

define a broader analyst, as opposed to strictly a computer

systems analyst?"

MR. NOBLE: My opinion is that in many of these

definitions, Government and industry really do not know what

they are after. I believe the answer is a joint effort to come

up with definition of a systems analyst "for everything."

I believe that these job descriptions can be defined.

Every company that I know of has some type of definition for the

skills that they possess. A systems analyst for one company is

i not the same as a systems analyst for another. I believe that

123
this is the type of thing that should be brought together so

that both industry and Government can agree on what a "systems

analyst" should be.

QUESTION - DR. BOYNTON : "Many university overhead

charges are as high as 60 percent of direct costs in research

study. What are some of the cost factors that make up this overhead charge?"

DR. BOYNTON: I can best explain in terms of ours at

The American University.

I will be the first to point out that there are certain

inherent mysteries in university overhead that in some cases

may be worth probing, but the deeper you probe the less you see.

In the case of American University, our overhead is

57 percent of the personnel costs. This is our overhead as

audited by HEW. There is a certain percentage which is

chargeable to the central administration management of research,

a certain amount of the decentralized management of the

university, i.e., the colleges and the departments, are

chargeable to the management of the research.

A certain amount of the fiscal management of the

university is chargeable. Such things as the Library and other

research-relatable , usable facilities are also allocated to

research.

QUESTION - ENTIRE ' PANEL : "One RFP stated that the

contractor must name and make assurances that proposal teams

be the project teams.

"Comment on the Government specifying that the

contractor must use the personnel who wrote the proposal in

performing the project."

MR. WALBRECKER: We found that in terms of making a profit it only makes good sense that the people that write the

proposal do the work.

We find that it is the best business practice, and it

is the best thing for the Government. When the Government asks

us: "Will this man be available?" and we say, "Yes," it is

based on a timely start. Having the same team together depends

upon getting the project started by the anticipated time.

If it comes at some other time we will negotiate

having that man or men available.

DR. BOYNTON: I think from the university's point of

124
view, almost all of our contracts are undertaken with this

stipulation. It would be a rare and accidental occurrence

where such was not the case.

MR. NOBLE: I think you will find that the man or team

that spends nine months to 18 months writing the proposal, and

wants the answer between 9 and 18 days from the contractor

generally is the man or team who stays on the project.

Why shouldn't it be the same to have the proposal writer

be the project manager if the Government proposal writer is going

to be the project manager?

QUESTION - DR. BOYNTON: "Most relevant applied research

today is of interdisciplinary or systems nature. Universities

tend to reward individual research with many publications over a short period of time, while interdisciplinary work has a longer

time requirement.

"This would tend to imply that universities should

discontinue this type of business, as you seemed to imply.

"How about changing the reward system at universities

so that interdisciplinary team approaches can be effectively

managed?"

DR. BOYNTON: This is what many of us are working on.

The problem is to create an interdisciplinary research

effort which at the same time is not completely pulled free of

the academic setting. To walk that tightrope and at the same time

create those kinds of research experiences which are necessary

for faculty and students generally, graduate students

particularly, is my obligation.

But there are relatively few conventional ways of

accomplishing this, so it is a matter of inventing the

appropriate devices.

For those of you in social science research there is

the Survey Research Center at the University of Michigan, which

has gone a long way toward accomplishing this by focusing on one

particular methodology. In the sense of focusing on applied

research and interdisciplinary research there is no really very

good way of doing it.

The American University had spun off more institutes

and centers than you can imagine because the marriage could not

be consummated. I would hate to simply produce something which

would have the same kind of history.

QUESTION - MR. NOBLE: "Comment on the problem

125
encountered by Mr. Moriarty in using the BOA. Doesn't the

objection raised by the Department of Commerce lawyers on the

NBS-BOA apply to all Government agencies?"

MR. NOBLE: I think we are talking about two different

things

.

I did not have time to explain the Basic Ordering

Agreement for software development. What is really happening is

that the 80-plus companies that are on the software development

Basic Ordering Agreement of GSA have been checked for financial

stability and prices have been established per hour for a particular type of skill to be performed.

The final contracting is accomplished by the agencies

themselves, their contracting staffs by selecting through the

capability files maintained by GSA and index registers that are

maintained by skill, specialty or subject matter. This is done

by sending to at least two companies a task or specification and

having those companies respond by the number of man-hours

required and rates established, on how long, and what the costs

will be to accomplish the job.

There is a difference, because where the basic ordering

agreement is primarily for a particular skill, let us say a physicist in social sciences, or a particular professional skill,

the job descriptions of the GSA Basic Ordering Agreement are

under the programmer and then that programmer may be a physicist

who is qualified on the Exec-2 operating system or UNIVAC 1108.

Primarily you are looking for skill.

QUESTION - MR. WALBRECKER: "Please discuss the

differences between a co-equal teaming arrangement and the more

familiar 'prime sub' arrangement?

"What are the salient benefits and pitfalls in your

experience for each of these arrangements?"

MR. WALBRECKER: The best way I can interpret that

question is to define "co-equal" as a joint venture agreement of

two parties.

In our teaming arrangements, we prefer the primesubcontractor type of relationship. We find that someone must be

responsible for the technical work. Someone must be responsible

for the administrative work and the fact that the job is done on

time within budget. Most of our teaming arrangements, and there

have been many, are based on a prime- subcontractor role.

MR. MORIARTY: At this time we would like to open up

to questions from the audience.

126
QUESTION: I have a question for Mr. Noble. It seems

that BOA's exist within Government procurement, yet Congress

slaps your wrist for doing BOA's. There seems to be a very

flagrant conflict between the two. Either they exist for everybody or they do not exist at all. I do not understand.

MR. NOBLE: I believe the Basic Ordering Agreement is the

answer to many small companies' prayers. I also believe that

under the present procurement system, where the Contracting

Officer and the independent office can make their own determinations of whether it is good or bad, is the problem that you are

talking about

This is not in accordance with what was envisioned with

centralized procurement under the Brooks Bill, Public Law 89-306,

in 1966.

There are many Federal agencies that are also saying

that unless a company is on the Basic Ordering Agreement they

will not do business with them.

DR. CUSHEN: There is standardizing among the agencies.

Each agency tends to be somewhat independent, and to set up its

own systems, its own security system, and so on.

Part of the feedback we have from the Department of

Commerce General Counsel's Office suggests two things.

First, they really were not administratively set up to

process an awful lot of cases. Therefore, we would be making

them build a bigger staff to process work that some other agency

really ought to be handling.

The second thing was that there was some question as to whether or not it would have been the intent of the Congress

to have the Department of Commerce have this privilege. That

would give a degree of freedom to, say, HEW, that their

appropriations subcommittee had no intention of giving them.

People are very wary of that kind of thing as well.

I guess I am almost acclimated to the notion that there will be

a number of systems in parallel that are not in fact consistent

among themselves.

MR. NOBLE: In Fiscal Year 1971 there were 15 Basic

Ordering Agreements for software development around the

Washington area.

I can name a half a dozen major agencies that cancelled

their BOA's and are using GSA's. I think this is either what it

is all about or should not be all about, but the point is

12 7
that at least they are playing off the same "sheet of music."

You have the HEW Contracting Officers, you have the Navy

Contracting Officers, you have the Army Contracting Officers, and

all of them interpret this type of thing differently. Am I right, Dr. Waterman?

DR. WATERMAN: Yes.

MR. NOBLE: What I am saying is that this type of

question will still exist and continue to exist until such time

as they all play off the same "sheet of music." I am not only

speaking of Government. I am speaking of industry as well.

128
SUMMARY OF THE CONFERENCE

DR. WALTER E. CUSHEN

SUMMARY OF THE CONFERENCE

Dr. Walter E. Cushen

I feel what we were hunting for in this conference were

reommendat ions that would help solve the problem of how to make it

possible for Government agencies to get better response from the

industrial processing community?

I believe I see ten kinds of recommendations coming

from what happened here today. I will attempt to summarize these

for you.

No. 1: Commercial suppliers can and should be used to

provide some professional services contracts . This will have to come from a lot of different people.

The White House could articulate this message in an Executive

Order. OMB could promulgate it through a revised doctrine. The

Secretaries of the various Departments and the heads of the

agencies could just simply pronounce: "Let's get with it

be done on

think that

the people

they think

that way.

However, along with this there is a lot of homework to

the attitudes of bureaucrats who tend to automatically

if something has to be done they wonder, "Do I have

to do it?" If they do not have the people to do it,

about going outside. They just automatically think

No. 2: The management consultant should get into the

process earl ier

it possible.

A mechanism should be developed that would make

This was suggested because he can help to formulate the

problem which is what he is trained to do.

No. 3: New techniques for getting contracts out need

developing .

Mr. Moriarty had one, the Brooks Bill was cited as another possibility.

It would seem that we have a couple of programs going

here with BOA's representing new ways of contracting. We need

to experiment with these and evaluate and determine if they are

wor kab 1 e

No. 4: Standardization is needed between programs. We

are inadequately standardized among the agencies with respect to

131
these different contract procedures. It seems that you are

suggesting further standardization.

No. 5: Better Liaison on Needs. The fifth seems to be

that in part we do not know what each other is doing. In part

you do not know what we want to buy, and in part we do not know

who to talk to. Furthermore, the people inside of both systems

are inadequately trained to track the targets on both sides here.

No. 6: Investment in New People Needed. It would

appear that we need to make an investment in new people rather

than to promulgate situations in which the 90-year-old guy is

the expert, gets the grant and when he dies nobody else is

qualified to do the job.

No. 7: Better time-phase plans needed. Part of the

thrust of my remarks was that there are a lot of tasks we cannot

specify too well. Along these lines the recommendation that I see coming from the conference sounds like this:

"Please, OMB; please program officers,

please budget justifiers, insist that your

people develop a better time-phase plan for

what you want. Even though it is incompletely

specified you are moving in the right direction and putting the firepower behind it."

No. 8: Better evaluation and feedback on performance

is needed. The seventh group of recommendations are that we in

Government do not really evaluate either what it is you do or

how you perform. You do not really get much of a sense of what

we do with your work after it is submitted. In order to make the

system healthier, this has to be rectified.

My own exposure to a number of agencies tells me that

they are too thinly staffed to do this kind of thing now.

Therefore this means that they have to get more people to do it,

or contract out to have it done, or stop doing something else

and do this instead.

So this recommendation has some economic consequences.

No. 9: New administrative improvements needed. I heard a number of administrative improvements that you seem to

think are needed. I wrote down several:

A) Fix up Circular A-76 and the other similar circulars

B) Try, if you can, to avoid the fourth quarter fiscal

rush

.

C) Change the overhead authorization rules.

D) Get a specialist in the Bureau of Domestic Commerce

for the professional services industries.

132
E) Recalibrate your rules so that universities can

be better participants in the process.

F) Give us faster reactions to our progress reports.

G) Industry could make use of some surplus Government

facilities, including computer time.

H) Change the rules on cost-plus fixed-fee.

I) Tell us who is competing against us.

J) Process vouchers faster.

No. 10: Keep the system honest. The final category

of suggestions that I heard was that somebody has to keep the

system honest. Although the Department of Commerce Counsel and

procurement people will do their best to keep us honest as we

go through this pr e

- qua 1 i f i ed bidders' procedure, that still is

an inadequate guarantee.

This is the thrust of what I see you saying today.

Comment on Summary

MR. NOBLE: In Item 4, I would like to see industry

involved in standardization as well as agencies. Standardize

among agencies, but also standardization between industries as well.

DR. CUSHEN: I would hope that we would get a lot of

industry objection to that, wouldn't we?

COMMENT: I think it is good that industry gets involved,

because if they are the ones that are going to be using it they

might as well get their thinking into it, rather than have it

be a one-sided deal.

QUESTION: It is one thing to sit here today and come

up with a list of ten recommendations, but then, do they just

get pushed up the system and then kind of die somewhere? Is

there going to be some kind of follow-up so that some of these

recommendations will be actually incorporated?

DR. CUSHEN: I think about the only thing we can say

is that we will follow them as far as we can. We are not known

for being bashful in my Division. We will push them to the point

where somebody says; "If you do not drop dead, I will guarantee

that you do .

Basically we are talking about actions that occur at

levels for which I am a "sub-optimal sub-optimization."

QUESTION: Is somebody going to be a follow-up person?

Will we be able to call and find out whether or not anyone

133
actually accomplished anything in terms of any one of those

recommendations?

DR. CUSHEN: I think you should ask Mr. Moriarty. In

spite of some of the things we said about the Department of

Commerce today, I assure you that they were very helpful

participants in making this Conference possible. While I am

sure that some of you may have drawn the false inference that

we thought they were part of the problem, the fact is that they

were part of the solution. I think that those people down there

are probably our best bet for making a change.

You also have access to Dr. Krueger and his National

Council of Professional Services Firms in Free Enterprise and

John Magnotti who is its Executive Secretary. I can assure you,

from personal experience, that they do have an effect.

You could also contact the President's Advisory Council

for Management Improvement.

You also should feel free to make your suggestions

directly to the Office of Management and Budget. I suspect that

whatever happens, they are likely to be the ringleaders of any

modification that takes place.

QUESTION: Is there anticipation of some kind of a follow-up meeting? At that time there would be some continuity

in the sense that this conference is providing the first dialogue

that you want to follow in more depth,

DR. CUSHEN: I think that more dialogue is needed. We

clearly need to have other constituencies believe that it is

worthwhile to participate in this session. The Government people

who are here do not really represent the program managers about

whom we were talking. I really would like to have your advice

as to what do we do next, if anything. I really would like to

have your frank appraisal as to whether or not you felt today

was very well spent.

We would like to have suggestions for change. As I mentioned in my own talk, I believe that the tone of this

Administration is beginning to filter down in a very effective

way. I think that you will see more Government agencies being

required to admit that making an honest profit is not un-American

I think they are going to start paying more attention. I suspect

that the timing of our recommendations is probably pretty good

to get something done, if anybody is going to change anything.

COMMENT: A lot of recommendations do not have to be

formalized by anybody. They just have to be done by the

Government agencies in procurement and by industry, for example,

134
being able to get in to talk to the Government project manager

before the job comes out. This is not a matter of anything

formal

DR. CUSHEN: I think we would be fooling ourselves if we

thought we would internalize this just by virtue of having vented

our feelings. Recommendations need to be written and then sent to

action points so that follow-up can occur.

Thank you for coming today. The Conference stands

ad j ourned

135
FORM NBS-1 14A (1-71) U.S. DEPT. OF COMM. i. PUbLlCAI ION UK RhPORl NO. A Gov t Accession BIBLIOGRAPHIC DATA NBS-SP-383 N°" SHEET

3. Recipient's Accession No.

4. TITLE AND SUBTITLE

The Creative Partnership: Government § the Professional

Services

(Proceedings: Fourth Users -Producers Conference)

5. Publication Date August 1373

6. Performing Organization Code

7. AUTHOR(S)

Various

8. Performing Organization

9. PERFORMING ORGANIZATION NAME AND ADDRESS

NATIONAL BUREAU OF STANDARDS

DEPARTMENT OF COMMERCE

WASHINGTON, D.C. 20234

IU. Proiect/ lask/work Unit No.

11. Contract/Grant No.

12. Sponsoring Organization Name and Address Technical Analysis Division with American University

Bldg. 225, Rm. A-164 Center for the Study of

Private Enterprise

13. Type of Report & Period Covered T^inal

I 4. Sponsoring Agency Code

15. SUPPLEMENTARY NOTES

16. ABSTRACT (A 200-word or less factual summary of most significant information. If document includes a significant bibliography or literature survey, mention it here.) These proceedings are written for the 4th Users -Producers Conference held at

the National Bureau of Standards on January 23, 1973. The Conference was designed

to highlight the problems and advantages in our present procurement system when

Government utilizes the services of professional and Professions Service firms.

The speakers addressed themselves to the many facets of the procurement process.

They represent both the private and Government side and bring their views forward

in a clear and concise manner. Speakers are grouped into three panels. The first

panel describes the development of the problem, the second panel considers the

procurement' process , and the third panel discusses managing the project. At the

end of each group of panel speaches, there is a general discussion with comments

and questions by all attendees.

There is also a separate presentation given by the Honorable James C. Corman,

United States Congressman (Cal) , Chairman, Sub-Committee on Government Procurement

of Professional Services.

17. KEY WORDS (Alphabetical order, separated by semicolons)

Creative -partnership; management; operating; procurement; services;

Users -Producers

.

18. AVAILABILITY STATEMENT 19. SECURITY CLASS

(THIS REPORT)

21. NO. OF PAGES

fXl UNLIMITED. is

UNCLASSIFIED

1^2

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