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THE NEXT STEPS IN SERVICES ACQUISITION REFORM: LEARNING FROM THE PAST, PREPARING

FOR THE FUTURE

HEARING

BEFORE THE

SUBCOMMITTEE ON TECHNOLOGY AND

PROCUREMENT POLICY

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

MAY 22, 2001

Serial No. 107–39

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

——— ———

——— ———

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY

THOMAS M. DAVIS, Virginia, Chairman

JO ANN DAVIS, Virginia

STEPHEN HORN, California

DOUG OSE, California

EDWARD L. SCHROCK, Virginia

JIM TURNER, Texas

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

MELISSA WOJCIAK, Staff Director

VICTORIA PROCTOR, Professional Staff Member

JAMES DECHENE, Clerk

MARK STEPHENSON, Minority Professional Staff Member

(III)

C O N T E N T S

Page

Hearing held on May 22, 2001 ............................................................................... 1

Statement of:

Cooper, David E., Director, Acquisition and Sourcing Management, General Accounting Office; David R. Oliver, Jr., principal Deputy Under

Secretary of Defense, Acquisition, Technology and Logistics; David A.

Drabkin, Deputy Associate Administrator, Office of Acquisition Policy,

Office of Government-wide Policy, General Services Administration;

Steven Kelman, Albert J. Weatherhead III and Richard W.

Weatherhead professor of public management, John F. Kennedy School

of Government, Harvard University; Michael W. Mutek, senior vice

president, general counsel, and secretary, Raytheon Technical Services

Co., representing the Professional Services Council; and Mark Wagner,

Director of Federal Government Affairs, Johnson Controls, representing

the Contract Services Association ............................................................... 8

Letters, statements, etc., submitted for the record by:

Cooper, David E., Director, Acquisition and Sourcing Management, General Accounting Office, prepared statement of ........................................... 11

Davis, Hon. Thomas M., a Representative in Congress from the State

of Virginia, prepared statement of .............................................................. 4

Drabkin, David A., Deputy Associate Administrator, Office of Acquisition

Policy, Office of Government-wide Policy, General Services Administration, prepared statement of .......................................................................... 36

Kelman, Steven, Albert J. Weatherhead III and Richard W. Weatherhead

professor of public management, John F. Kennedy School of Government, Harvard University, prepared statement of .................................... 48

Mutek, Michael W., senior vice president, general counsel, and secretary,

Raytheon Technical Services Co., representing the Professional Services

Council, prepared statement of .................................................................... 57

Oliver, David R., Jr., principal Deputy Under Secretary of Defense, Acquisition, Technology and Logistics, prepared statement of ..................... 26

Turner, Hon. Jim, a Representative in Congress from the State of Texas,

prepared statement of ................................................................................... 98

Wagner, Mark, Director of Federal Government Affairs, Johnson Controls, representing the Contract Services Association, prepared statement of ........................................................................................................... 68

(1)

THE NEXT STEPS IN SERVICES ACQUISITION

REFORM: LEARNING FROM THE PAST, PREPARING FOR THE FUTURE

TUESDAY, MAY 22, 2001

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT

POLICY,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:01 a.m., in room

2154, Rayburn House Office Building, Hon. Thomas M. Davis of

Virginia (chairman of the subcommittee) presiding.

Present: Representatives Thomas Davis of Virginia, Ose,

Schrock, and Turner.

Staff present: Melissa Wojciak, staff director; Amy Heerink, chief

counsel; Victoria Proctor, professional staff member; James

DeChene, clerk; Trey Henderson, minority counsel; Mark Stephenson, minority professional staff member; and Jean Gosa, minority

assistant clerk.

Mr. THOMAS M. DAVIS OF VIRGINIA. If we could have everyone

take their seats, since we have opening statements, we will begin

it now so that we can move on.

Good morning and welcome to today’s oversight hearing on services acquisition reform. As many of you know, in the early to midnineties, Congress and the administration worked together to reform the way government acquires goods and services. This collaboration resulted in landmark legislation that included the Federal

Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of

1996, along with significant regulatory revisions such as the rewrite of the FAR Part 15. Many of you at this hearing today

worked with me and many others in Congress to achieve reforms

that truly revolutionized the way government does business with

the private sector. Today, I intend to see how those significant reform efforts have been implemented government-wide and what

next steps we need to take to further streamline government acquisition of services.

Over the past decade, the growth of service contracting has

largely matched the increase of service contracting in the private

sector. Unfortunately, there are many indications that the way government contracts for services has not matched the practices of the

private sector. While acquisition reform touched on service contracting, it was not the emphasis of those efforts. Today, in light

of the growth of service contracting, I will re-evaluate the need for

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a Services Acquisition Reform Act [SARA]. I believe this subcommittee needs to determine what can and should be done legislatively to promote greater utilization of commercial best practices,

increased cross-agency acquisitions along with enhanced crossagency information sharing, share-in-savings contracting, and acquisition work force training. In fiscal year 1990, the government spent $70 billion on service contracts. That number has grown to over $87 billion in fiscal year

2000. That number represents an increase of 24 percent over the

past 10 years. Service contracts now represent 43 percent of total

government purchasing. This is larger than any other category of

government purchasing. Additionally, contracting for information

technology services has grown from $3.7 billion in fiscal year 1990

to $13.4 billion in fiscal year 2000, with that number only expected

to increase as the Federal Government moves to transfer itself to

a more citizen-centric, streamlined service provider.

The rise in service contracting has also coincided with several

trends that suggest sufficient contract management is not occurring. The General Accounting Office has put contract management

on its high risk list for both the Department of Defense and the Department of Energy. Collectively, these two agencies make 75 percent of the government’s total purchases. The challenge of contract

management is only heightened by the drastic reductions in the acquisition work force that appear likely to continue over the next

several years, as 50 percent of this work force becomes eligible to

retire. In no other area is the need for strategic human capital

management so critically necessary. As we ask the acquisition

work force to play a larger role in increasingly complex procurements and understand how to be program managers in addition to

contracting officers, we have to determine how to give this already

strained work force the training and the tools necessary to succeed.

Moreover, it is clear that innovative contracting options are

largely underutilized by the acquisition work force due to lack of

training and resources. Although the Office of Federal Procurement

Policy has stressed the importance of performance-based contracting since 1991, the Procurement Executives Council recently recommended that agencies achieve a goal of 10 percent performancebased contracting in fiscal year 2001. While the value of this type

of contracting is widely recognized in the commercial sector for

achieving greater efficiency, it is not clear that government yet understands how to write this type of performance statement or is

adequately training acquisition personnel to use these types of contract vehicles.

Training and understanding of commercial sector processes is

crucial to the success of performance-based contracting because we

are tasking a work force we have routinely asked to be risk averse

to move in an entirely new direction and away from contracting

solely based on the regulations included in the FAR. One of the

main objectives of this hearing will be to determine what can be

done to ensure government is effectively utilizing performancebased statements of objectives.

I understand, after meeting with the GAO, that we do not have

an understanding of how agencies are utilizing performance-based

contracting. Additionally, we do not know if agencies have develVerDate 11-MAY-2000 11:14 Mar 27, 2002 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 C:\DOCS\77329.TXT HGOVREF1 PsN: HGOVREF1
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oped a set of best practices and if that information is being shared.

We also do not know if agencies are working toward identifying

how and when it is most appropriate to do horizontal acquisitions.

I believe that part of developing a legislative package for acquisition reform includes having better measurements in these areas.

Today, I would like to request that the GAO develop a report for

this subcommittee that examines how agencies are performing in

those areas.

While there are a number of other initiatives that should be considered for SARA, there are two that I believe deserve immediate

consideration. First, I would like to explore what needs to be done

to increase the use of share-in-savings contracts. Section 5311 of

the Clinger-Cohen Act authorized OFPP to conduct a pilot sharein-savings IT acquisition program. Unfortunately, that program

has not been utilized. I believe this type of contracting, which is

frequently used in the private sector, holds great benefits for government. The Department of Education has just entered into a

share-in-savings contract for information technology modernization

that has the potential to revolutionize the way it does business.

Other agencies could and should do the same.

Second, I continue to believe that we are not allowing Federal,

State, and local governments the opportunity to use a good government solution. I intend to revisit cooperative purchasing off the

GSA schedules for IT products and services. Cooperative purchasing allows every level of government to leverage purchasing power

to ensure the taxpayers’ dollars are spent effectively and efficiently.

I look forward to hearing from today’s witnesses on our next steps

for acquisition reform.

Now today the subcommittee is going to hear testimony from

David Cooper, GAO; Deputy Assistant Secretary David Oliver from

the Department of Defense; David Drabkin from GSA; Dr. Steve

Kelman from the John F. Kennedy School of Government at Harvard University.

In the continued spirit of bipartisanship, I would like to note for

the record that Steve and I recently went up against Harvard students in a rock-and-roll sixties trivia contest; with the same effort

we brought to procurement reform, we won. [Laughter.]

Mr. THOMAS M. DAVIS OF VIRGINIA. Mr. Michael Mutek from

Raytheon Technical Services, testifying on behalf of the Professional Services Council, and Mr. Mark Wagner of Johnson Controls, testifying on behalf of the Contract Services Association.

[The prepared statement of Hon. Thomas M. Davis follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. I now yield to Congressman

Turner for his opening statement.

Mr. TURNER. Thank you, Mr. Chairman.

The Federal Government is the largest purchaser of goods and

services in the world, and in just the past fiscal year the U.S. Government contracted for $204 billion in goods and services. Unfortunately, we know Federal procurement is an area which historically

has been prone to waste, fraud, and abuse. And the difference between doing it right and doing it wrong can literally be billions of

taxpayer dollars. With this in mind, it is of the utmost importance

that we ensure that the Federal Government procurement system

is as efficient and credible as possible, and I commend the chairman for the emphasis placed upon this subject by holding this

hearing this morning.

Federal contracting has seen extraordinary changes in the past

decade. The end of the cold war greatly reduced our spending requirements and changed our outlook on procurement policy. In the

early 1990’s, in an effort to adjust to the new marketplace, the

Congress and the executive branch began a comprehensive statutory and regulatory overhaul of the Federal acquisition system. The

result has been a shift in Federal spending patterns, a decline in

the Federal work force, a simplification of acquisition rules, and

the introduction of new contracting vehicles and techniques.

Despite the progress that we have made to date, there are still

concerns that acquisition reform is being delayed. This delay is due

to problems that are longstanding, as well as to some problems

that are of a more recent vintage. In particular, the concerns regarding human capital challenges, the rapid growth of service and

IT contracting, poor oversight of contractor performance, and the

inability of the Federal Government to adopt innovative contracting

vehicles have given us good reasons to have this hearing today.

Again, I thank the chairman for his focus on this issue. I look

forward to hearing from all of our witnesses. The purpose of the

hearing is to investigate what needs to be done, so that agencies

and their managers will have the tools necessary to achieve true

reform. While we have seen some successes, obviously, there are

many challenges that still need to be overcome to ensure that the

taxpayers are getting the best value for every procurement dollar.

Thank you, Mr. Chairman.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you, Mr. Turner.

Mr. Schrock, any statement?

Mr. SCHROCK. Mr. Chairman, no, I do not have a statement. I

guess I would like to hear more about that rock-and-roll comment,

but being politically correct, I won’t do that. I am just looking forward to hearing the testimony today. Thanks for being here.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

I am going to call our first panel of witnesses to testify. As you

know, it is the policy of this committee that all witnesses be sworn

before you testify. Would you please rise with me and raise your

right hands?

[Witnesses sworn.]

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you. You can be seated.

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To afford sufficient time for questions, if you would limit yourselves to 5 minutes on your opening statements, we will have a

buzzer up here. It will be green; it will turn yellow. That will give

you a minute to sum up, and then when it is red, if you would try

to end at that point. We have read the total statements which will

be included in the record. So we can then go right to questions.

We will begin with Mr. Cooper, followed by Mr. Oliver, followed

by Mr. Drabkin, followed by Dr. Kelman, by Mr. Mutek, and Mr.

Wagner. Please proceed, Mr. Cooper, and thank you for being with

us.

STATEMENTS OF DAVID E. COOPER, DIRECTOR, ACQUISITION

AND SOURCING MANAGEMENT, GENERAL ACCOUNTING OFFICE; DAVID R. OLIVER, JR., PRINCIPAL DEPUTY UNDER

SECRETARY OF DEFENSE, ACQUISITION, TECHNOLOGY AND

LOGISTICS; DAVID A. DRABKIN, DEPUTY ASSOCIATE ADMINISTRATOR, OFFICE OF ACQUISITION POLICY, OFFICE OF

GOVERNMENT-WIDE POLICY, GENERAL SERVICES ADMINISTRATION; STEVEN KELMAN, ALBERT J. WEATHERHEAD III

AND RICHARD W. WEATHERHEAD PROFESSOR OF PUBLIC

MANAGEMENT, JOHN F. KENNEDY SCHOOL OF GOVERNMENT, HARVARD UNIVERSITY; MICHAEL W. MUTEK, SENIOR

VICE PRESIDENT, GENERAL COUNSEL, AND SECRETARY,

RAYTHEON TECHNICAL SERVICES CO., REPRESENTING THE

PROFESSIONAL SERVICES COUNCIL; AND MARK WAGNER,

DIRECTOR OF FEDERAL GOVERNMENT AFFAIRS, JOHNSON

CONTROLS, REPRESENTING THE CONTRACT SERVICES ASSOCIATION

Mr. COOPER. Mr. Chairman and members of the subcommittee,

thank you for inviting me to be here today. I look forward to sharing with the subcommittee the work that we’ve done on service contracting. Let me say from the outset that we’re more than pleased

to work with this subcommittee to provide you the information and

reports that are needed to have proper and effective oversight of

Federal procurement issues.

Clearly, contracting for services is an issue of growing importance and an area in need of management attention. Last year Federal agencies spent more than $87 billion to acquire services. Service acquisitions now account for 43 percent of all Federal contract

spending. This is a significant increase from just a few years ago,

and the amount is likely to grow in the future. The growth in service purchases has been driven largely in two areas: information

technology services and professional, administrative, and management support services.

Along with the growth in service contracting, we’ve also witnessed significant changes in the way Federal agencies buy. Today

there is a growing trend toward agencies purchasing services by

using contracts awarded and managed by other agencies. For example, the General Services Administration, through its Federal

Supply Schedule, offers a wide range of services, everything from

engineering to laboratory testing and analysis to clerical and professional support services. Last year agencies used the Federal supply program to buy $7 billion of these services.

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Acquisition reform legislation in the 1990’s also authorized the

use of new contract vehicles, such as multiple award task and delivery order contracts and government-wide agency contracts

[GWACs]. These new contracts provide agencies with a great deal

of flexibility and allow government contracting personnel to procure

services for their customers quicker than was previously possible.

However, these new contracting vehicles and the rapid growth in

service acquisitions have posed a challenge for the Federal acquisition work force. Our work, and that of other audit organizations,

shows that service acquisitions are not always being run efficiently.

In particular, agencies are sometimes not clearly defining their requirements, fully considering alternative solutions, performing sufficient and effective price evaluations, and adequately overseeing

contractors’ performance. Put simply, the poor management of service contracts undermines the government’s ability to obtain good

value for the money spent and puts taxpayer dollars at risk.

Compounding these problems are the agencies’ past inattention

to strategic human capital management. We are concerned that

Federal agencies’ human capital problems are eroding the ability of

many agencies—and threaten the ability of others—to perform

their missions economically, efficiently, and effectively. Following a

decade of downsizing and curtailed investments in human capital,

Federal agencies currently face skills, knowledge, and experience

imbalances that, without corrective action, could worsen, given the

number of Federal workers that are eligible to retire by 2005.

It is becoming increasingly evident that agencies are at risk of

not having enough of the right people with the right skills to manage service procurements. Consequently, a key question facing government agencies is whether they have today, or will have tomorrow, the ability to acquire and manage the increasingly sophisticated services the government needs.

Congress and the administration are taking steps to address

some of these contract management and human capital challenges.

For example, in April of last year, the Procurement Executives

Council established a goal that 50 percent of service contracts will

be performance-based by the year 2005. The goal of increasing the

use of performance-based contracts was affirmed by the Office of

Management and Budget earlier this year. And only this month,

we saw the Federal Acquisition Regulation revised to establish a

preference for using such contracts.

We support the use of performance-based contracting. If properly

implemented, performance-based contracting should result in reduced prices and improved performance. However, it should be recognized that moving to these types of contracts will not be easy.

The success of using performance-based contracts will depend on

the extent to which agencies provide the necessary training, guidance, and tools to their work forces, and establish metrics to monitor the results of the use of these contracts.

With regard to human capital management, it is clear that both

OPM and OMB will play substantial roles. OPM has begun stressing the importance of planning for strategic human capital needs

and are focusing more attention in this area. They have also assisted agencies by developing tools to help work force planning. For

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example, it has developed a model and has launched a Web site to

facilitate information sharing among the Federal agencies.

OMB has played a more limited role. However, OMB’s role in

setting government-wide management priorities and defining resource allocations will be critical to inducing agencies to integrate

strategic human capital planning into their business processes. Toward that end, OMB’s current guidance to agencies on preparing

their strategic and annual performance plans states that the plans

should set goals in such areas as recruitment, retention, and training.

Also, earlier this month, OMB instructed agencies to submit a

work force analysis by June 29 of this year. The analysis is to include summary information on the demographics of the agencies’ work force; projected attrition and retirements; an evaluation of

work force skills; recruitment, training, and retention strategies

being implemented, and barriers to maintaining a high-quality and

diverse work force. The information developed from this initiative

should prove useful in identifying human capital areas needing

greater attention.

In summary, the increasing significance of contracting for services has prompted—and rightfully so—a renewed emphasis by Congress and Federal agencies to resolve longstanding problems with

service contracts. To do so, the government must face the twin

challenges of improving its acquisition of services while simultaneously addressing human capital issues. One cannot be done without the other. Expanding the use of performance-based contracting

approaches and emphasizing strategic human capital planning are

welcomed and positive steps, but sustained leadership and commitment will be required to ensure that these efforts mitigate the risks

the government currently faces when contracting for services.

That concludes my statement.

[The prepared statement of Mr. Cooper follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

Mr. Oliver.

Mr. OLIVER. Mr. Chairman and Congressmen, I’d like at the beginning to demonstrate a rare executive/legislative branch cooperation because I’ve made a graph that actually makes your point very

well, I think, over there. What you’re seeing is the problem that

you, Mr. Chairman, are really talking about, which is that over the

last 20 years the red line shows the acquisition dollars that are

going to nonservice contracts, and the blue line shows what’s going

to service contracts. What it says is what your focus is, where the

money is, and the money is coming there, and so therefore, it needs

a significant amount of attention. That’s in the Department of Defense.

So the question is, what are we doing? What I would like to do

is tell you about four things, one of which has to do with the people. It is important that we figure out how many people we need

and how they’re supposed to be trained. We have had a year study.

We put a special task force together. They have been working on

this for a year, and they report in to me this summer, and I’ll have

that analyzed before the end of the summer. In addition, that’s

going to tell us, talk to us about how the people should be shaped.

Second is how you educate them. Four years ago, nearly 5 years

ago, we put out a policy that said, in accordance with industry

standards, that we would train people for 40 hours a year; we

would provide them training. So that goal was laid out.

But the second part of that is how good that training is. I think

that is getting better and we’re going to see results. We have gotten a new president in Defense Acquisition University, and what

we have done is gone to the business schools and said, ‘‘Give us

your courses or you make up the courses to teach our people how

to do better business.’’ And so we’re going away from the homegrown courses to the business schools and having them do that.

I looked at the first five case studies about 2 months ago. That

progress is moving out. The intention is, and a great deal of the

training that exists now is Web-based, but the intention is to have

first-class business school quality training on the Web.

The second part is performance-based contracting. We have put

out a goal to have 50 percent of the contracts, both by size, dollar

value, and number of contracts, to be performance-based by year

2005. We have a manual, a guide, about how to do that, which was

published in December. The problem is, as you would say, where

are the examples on the Web for people to use, and I don’t have

examples and templates and I will have within 3 months on the

Web, so that everybody can access it. So they cannot only use this

guide about how to write the contracts, they can use the templates.

So I’ve got a goal and I have the methods to achieve the goal, and

then the question is about management and oversight.

With the recognition as to where the money is, I briefed Under

Secretary Aldridge yesterday, and he is speaking to the Secretaries

this week. I expect us to start the same sort of review process that

we do for capital investment programs such as airplanes and ships,

to do this same thing with service contracts. In other words, we’re

going to start a review process so a contract at any level has to be

reviewed at that level. There’s a level of them that get reviewed by

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Pete Aldridge. There’s a level that get reviewed by the Secretaries

of the Services. There’s a level that get reviews by the generals and

admirals, and that process is set up.

The final thing is incentive acquisition. All of this works with the

fact that people have to bring in new ideas. The best one I’ve seen

is the logistics modernization that the Army did, which is essentially a share-in-savings. It was done last year. You know, Mr.

Chairman, how difficult that was to pull off, and we both were involved in making that happen. The interesting problem is there are

still barriers to doing share-in-savings because of the length of contracts problem and with respect to the initial investment the companies have to put out.

But the Department of Defense recognizes the problem that you

are addressing. It’s the problem that’s on that viewgraph or that

slide I brought to the left. I think it’s a very dramatic problem, and

we are focused on it. I would like to provide you an update in about

6 months as to how we’re doing because that’s when we’re going

to see whether or not these programs are coming together. Thank

you, sir.

[The prepared statement of Mr. Oliver follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

Mr. Drabkin, thanks for being with us.

Mr. DRABKIN. Chairman Davis and members of the committee,

thank you for the opportunity to appear this morning and address

a number of key issues concerning acquisition within the U.S. General Services Administration. As you are aware, GSA’s Administrator has not been confirmed yet. We’re hoping that happens next

week. Therefore, it would be inappropriate for me to address during the course of my testimony, either oral or in writing, any specific proposals for the future.

Preliminarily, let me comment that many of us in the room today

played an important role in reforming the government’s acquisition

system. Beginning with the section 800 panel in the early 1990’s,

we saw a major effort to study our acquisition system and make

changes that streamline the system, resulting in lower overall costs

to the government; improved quality of the goods, services, and

construction we acquire, and increased reliance on the private sector to provide solutions to the government’s requirements. These

changes have been dramatic.

Just 6 years ago, if an employee required a tape recorder to perform her work, she would have likely had to prepare a requisition

form in paper on a typewriter kept just for the purposes of completing those forms. The requisition was routed through the office mail

process to a number of different offices for various approvals and

eventually found its way to the Procurement Office, which would

then generate more paper, mail it or fax it to a supplier, who

would, instead of returning a product, return a promise to deliver

a product and then some time later deliver a product to a warehouse, which doesn’t exist anymore, where it would be accounted

for, logged in, and then shipped through channels to the person

that ultimately needed a taperecorder.

How long did that process take? It used to take between 4 to 6

months. And what did that process cost the government? Well,

some experts have estimated that it cost the government in the

hundreds of dollars per transaction. What has acquisition reform

done to change that scenario? Today the government employee can

log on the Internet from their desk, purchase the tape recorder

using their government purchase card, and arrange for delivery as

soon as the next day or whenever the time constraints make it necessary. The estimated cost to the government is less than $50 per

transaction. At a minimum, whether you agree whether it costs

$100 or $50 today, everybody we’ve talked to agrees that it at least

avoids a cost of $20 per transaction, and last year alone in the Federal Government we did 24 million transactions. Multiply that

times $20 and that’s money.

While acquisition reform has made our processes simpler and

faster in terms of responding to internal government customers for

low-dollar-value items, it has made the processes more difficult for

members of the acquisition work force. In the beginning of the

1990’s, the majority of GSA’s contracting specialists had relatively

well-defined processes to follow which did not require a great deal

of specialized education and training. Generally, they received a

purchase request. They made sure all the i’s were dotted and the

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t’s were crossed, attached the correct contract clauses, sent out an

IFB under FAR Part 14 if the contract exceeded $25,000.

On bid opening day, they opened all the bids received, prepared

an extract of the bids that were received. They checked to see if

the lowest price offeror was responsive to the requirement, and if

the offeror was responsible, the contracting officer then awarded

the contract to the lowest responsive responsible bidder. It was fair

to observe that our contracting folks were in those days shoppers.

Not so in today’s environment.

Today our acquisition work force faces a variety of challenges in

acquiring the goods, services, construction, and real estate that

their government customers need to perform their missions. The

expectations and demands of our work force are greater than ever

before. In addition to managing the procurement processes from

cradle to grave, contracting specialists are now expected to have

much greater knowledge of market conditions, industry trends, and

the technical details of the commodities and services they procure.

This is a much broader span of responsibility than they’ve ever had

before.

Turning to performance-based contracting, this is a completely

different approach than the government used to have to doing business. In the past we told people how to make things, not what we

wanted in terms of a solution. We spent pages—I mean Vice President Gore gave an award for the reduction of the cookie specification; T-shirts had multiple pages of specifications—instead of telling people what we needed were chocolate chip cookies or T-shirts.

In today’s environment our people under performance-based contracting—and it shouldn’t be limited just to services—are required

to define outcomes in terms that they can measure and then acquire those outcomes from industry.

Also, there’s been a significant change in terms of pricing. In the

past we did pricing based upon the lowest responsible responsive

bidder or we did it based upon adding costs and putting profit on.

Today we don’t do that. We expect our people to understand how

the marketplace develops prices and then compete in that same

marketplace.

And finally, I would observe the next major change that we

should be aware of is what has happened in the area of best value.

In the past we only focused on getting lowest price. In fact, Senator

Glenn was quoted—and I don’t remember it exactly—about sitting

on top of this rocket with all those explosives that went to the lowest bidder. Today we look for the best value. We look for what’s the

long-term cost, the life-cycle cost, the maintenance impacts, and

the disposal impacts of what we buy.

The rest of my comments are in my speech and then they’re in

the record. Thank you.

[The prepared statement of Mr. Drabkin follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

Dr. Kelman, welcome.

Mr. KELMAN. Congressman Schrock, this trivia contest was—the

students had a great time; Chairman Davis and I had a great time,

a good bipartisan team, and just to repeat a point he made, we did

emerge victorious from this contest.

But, Mr. Chairman, I just wanted to share with you, I was listening a few nights ago to ‘‘The Top Ten at 10:00’’ on the oldies station

in Boston. It was the top 10 last week in 1969. And I remember

you asked a question, which of course the students flubbed, about

who did the title song from the musical ‘‘Hair,’’ which of course

was——

Mr. THOMAS M. DAVIS OF VIRGINIA. The Cowsills.

Mr. KELMAN. The Cowsills, of course. [Laughter.]

Now here’s the interesting thing: This week in 1969, that was

No. 2. Do you know what was No. 1 that week? Fifth Dimension,

Age of Aquarius. So two songs from ‘‘Hair’’ were one and two that

week in 1969.

Mr. THOMAS M. DAVIS OF VIRGINIA. That will add a lot to the

record, and I appreciate that. [Laughter.]

Mr. KELMAN. Yes, I’m sure it will. I’m sure it will.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you.

Mr. KELMAN. Let me move to a more interesting topic, government procurement. I wanted to highlight, if I could, two areas from

my written testimony. Let me also thank Chairman Davis, Congressman Turner, and Congressman Schrock for inviting me here

today.

I want to talk, first, about share-in-savings contracting, which is

I think one area that is ripe for legislation right now. Let me also,

before I talk about it, briefly, just for the interest of full disclosure,

indicate that I’ve done consulting for Accenture, formerly Andersen

Consulting, on this issue.

What is share-in-savings contracting? Share-in-savings contracting begins by looking at the benefits in terms of lower costs or improved agency performance that the government is seeking from a

contract. Then what it says is, we pay the contractor as a percentage of the benefits that the contract actually realizes. So the more

the savings, the more the benefits from the contract, the more the

contractor gets paid. The fewer the savings, the less the contractor

gets paid. In fact, in some versions of share-in-savings contracting,

if the contract fails and doesn’t deliver any benefits at all, the contractor isn’t paid at all.

We still have, unfortunately, too many IT projects that fail, and

I think we should see share-in-savings contracting mainly as a way

to increase the success rate of our IT service contracting in the

Federal Government by creating this dramatically increased incentive for the contracts to do well. The more they deliver for the government, the more money they make, as they should. If they don’t

deliver for the government, they don’t make money.

Mr. Chairman, you indicated in your opening statement, you

talked about the first share-in-savings contract in the information

technology area that was signed last year within the Federal Government. We now actually have a track record under that contract.

This week’s Federal Computer Week features a story about that

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first share-in-savings contract that you referred to. The cover says,

‘‘Share-in-Savings Contract Earns High Marks,’’ and the story says, ‘‘Education share-in-savings contract grades A.’’ The contract came

in on time. It’s successful. It’s already delivering about $3 million— by January, it delivered about $3 million in savings. The Education

Department official was quoted as saying in the story, ‘‘It’s truly

awesome. We didn’t pay anything until we achieved our business

results. This is the way the government will be doing business in

the future.’’ Share-in-savings contracting isn’t easy. I think it has a lot of

promise. I think that GSA’s Federal Technology Service, under the

leadership of Commissioner Sandy Bates and Ken Buck, deserve a

lot of credit for the work they have been doing over the last few

years to try to expand knowledge and interest in this.

In my written testimony, I suggest a number of legislative

changes that I would urge Congress to make as expeditiously as

possible to try to encourage share-in-savings. Again, I discuss some

of those in my written testimony.

The other topic I’d like briefly to address in the area of service

contracting is what I call contract consolidation, sometimes called

‘‘contract bundling.’’ This really fits into the category of the Hippocratic admonition, ‘‘First do no harm.’’ Because, unfortunately,

there are lots of proposals for dangerous overregulation in this area

that continue to emerge from parts of Congress, although, happily,

not from this committee.

Although contract consolidation is certainly not always appropriate, frequently this is a contracting method that brings great

value to the government. When buying products, contract consolidation often allows a buyer to get significant quantity discounts— buying in bulk, every child knows, if you buy in bulk, you save

money—better terms and conditions on the contract, and more attention from the supplier because we’re a larger customer for the

supplier.

When buying IT services involving business process modernization, the alternative to contract consolidation will generally be to

have a whole bunch of legacy contractors continuing to work and

the government having to act as a systems integrator for this kind

of effort, which we know from long experience is a recipe for disaster.

So, for these reasons, purchasing departments in commercial

firms generally regard contract consolidation, or appropriate contract consolidation, as one of their core responsibilities in the best

practice.

If I can just briefly—I, actually, last night happened to get two

annual reports from companies I happen to own stocks in. They

just literally came yesterday. I was reading them, reading them

last night, and both of them refer in their section on achievements

for the last year about things about contract consolidation. One of

the reports says, ‘‘We use our considerable purchasing power to negotiate favorable pricing and improve our ability to recover repair

costs under manufacturers’ warranties.’’

The other, which is an Internet business-to-business e-commerce

company, talks about on behalf of one of their customers, ‘‘The customer uses the system to concentrate its total purchasing volume

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through common suppliers and immediately experienced savings,

an average of 15 percent in various indirect product categories.’’ Contract bundling or contract consolidation is already an area

that is very extensively regulated, in my view overregulated. I urge

the committee to beware of proposals, particularly coming from

other committees, in this area. This is an area of this committee’s

jurisdiction, and I very much hope you will continue to exercise

your traditional responsibility on taxpayers’ behalf to avoid very

costly and dangerous legislation in this area. Thank you.

[The prepared statement of Mr. Kelman follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Dr. Kelman, thank you very

much.

Mr. Mutek.

Mr. MUTEK. Mr. Chairman, Congressman Turner, Congressman

Schrock, thank you for this opportunity to testify before you today.

I am Michael Mutek, and I appear on behalf of the Professional

Services Council. PSC has been an outspoken advocate of acquisition reform since its founding some 30 years ago. We are proud to

have been involved in these efforts, particularly over the last decade, during which we have witnessed a significant transformation

in the way the government procures its goods and services.

The acquisition reforms of the 1990’s gave government buyers

more freedom to define program requirements with performance

objectives, which you heard about; make price-quality tradeoffs;

streamline the competition process, and also emphasize past performance in contractor selection. Also, the reforms of the 1990’s acknowledged that, through the imposition of unique burdens and

risks, the Federal procurement process could raise prices and discourage companies from doing business with the government.

We agree with the GAO. Its testimony today is in line with what

we have advocated for a long time. Specifically, education and

training is the acquisition work force tool to achieve acquisition reform. Real, meaningful, and important progress has been made.

Most observers would agree that acquisition reform ranks with one

of the real success stories over the last decade. It is the result of

a collaboration between Congress, agencies, and the private sector.

This collaboration needs to continue.

However, despite this progress in transforming the largest buying organization in the world today, the Federal Government, more

improvements are needed. There still are too many non-valueadded requirements and processes that remain. We must ensure

our focus is on performance and not the process itself.

In addition, more work is needed to enable the government to access more fully the innovation and technologies available in the private sector. Nowhere is this truer than in the buying of services.

The record is clear that much of the government’s historic emphasis has been on how to buy products faster, better, and cheaper.

The acquisition of services has received little attention. However,

as our economy overall has moved to become a service economy—

and services now comprise the majority of government procurement—it is vital that greater attention be paid to how the Federal

Government acquires these services. These services are vital to the

government. Yet, the processes by which the government buys services has lagged. The question is, what more needs to be done to ensure that these professional and technical services are acquired in

a cost-effective and efficient manner?

The first critical issue is education. By enacting laws and implementing regulations, we do not create change. The government

must devote adequate resources to the most critical element of success reform, which is the training and education of the work force.

Training has not kept up with the reforms or with the capabilities

of the services sector. As a result, the issue in the professional

services arena, where the services are much more complex, is how

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ing of the services market, and particularly what’s available commercially, and how the services sector can, and should, be leveraged in the Federal marketplace.

Congress must make a determined effort to ensure that training

resources are made available and are a top priority among all

agencies. In the past Congress has attempted to get agencies to

make training and education a higher priority, but the investment

has not been made. Training is just too easy an item to cut or

delay.

We propose that Congress require that a percentage of administrative fees, perhaps 5 or 10 percent, be collected through the governmentwide, multiple-award contracts and/or purchases from the

GSA schedule, and devoted to the Federal Acquisition Workforce

Training Fund. Our vision is that these funds will be forwarded to

the Federal Acquisition Institute where they could be made available throughout the government to provide training.

The second critical issue is successful implementation of performance-based service acquisition, something we’ve heard quite a bit

about today. This allows the government to move away from dictating processes and permits the private sector to offer innovative solutions to complex problems. As you know, this is one of the first

major initiatives of the Office of Federal Procurement Policy, under

Dr. Kelman, and has been successful, but there still is more that

needs to be done and that is adequate training of the work force.

Third, we recommend that Congress extend to the civilian agencies the same authority now available to the Department of Defense to purchase services under FAR Part 12. Extending this authority would incentivize both the use of performance-based strategies and open a door to new and innovative solutions for a broader

cross-section of the services industry.

Fourth, the PSC advocates a horizontal, rather than vertical, integration of acquisition functions. Such an integration helps to promote vital cross-functional involvement in acquisitions.

And fifth, it is time to re-evaluate the role of the Service Contract Act as it relates to the mid-to high-end services. The Service

Contract Act was designed to cover those for whom the marketplace offered inadequate protection. Today’s robust marketplace

has changed. We offer you some ideas on this in our written material.

Finally, it is vital that the government recognize that technology

itself is not the solution, but rather the enabler. There must be a

real emphasis on re-engineering processes rather than simply automating legacy systems.

Mr. Chairman, your leadership, and that of the subcommittee, is

essential and greatly appreciated. We look forward to working with

you and your staff. Thank you.

[The prepared statement of Mr. Mutek follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

Mr. Wagner, thank you for being with us.

Mr. WAGNER. Thank you, Mr. Chairman, members of the subcommittee. My name is Mark Wagner, and I’m here on behalf of

the Contract Services Association, which represents over 330 companies providing a wide array of services to the Federal Government.

My company, Johnson Controls, provides facility management

and base operation support for a number of government agencies,

including the Departments of Defense and Energy as well as

NASA. We also provide facilities support for a large number of

commercial private sector companies, such as Microsoft, Sun Microsystems, EDS, IBM, Compaq, and many others.

I might also note that it’s a special pleasure to be before the subcommittee today, as I am a resident of the 11th District of Virginia.

Mr. THOMAS M. DAVIS OF VIRGINIA. That means I’m going to be

pretty easy on you.

Mr. WAGNER. Pardon me?

Mr. THOMAS M. DAVIS OF VIRGINIA. I’ll be pretty easy on you.

Mr. WAGNER. Yes, thank you. I was hoping so. [Laughter.]

Mr. Chairman, thank you for entering my statement into the

record. I would just like to emphasize a few key points.

You were right in your opening statement. While much has been

done to reform and streamline Federal acquisition policy with respect to purchasing hardware and equipment, improving how we

contract for services has in the past been relegated much to the

role of the lowly stepchild. We’re delighted that you are considering

promulgating a Services Acquisition Reform Act [SARA].

Areas that could be addressed include allowing longer contract

terms to enable potential investment by contractors, encouraging

more award-term contracts to reward good performance and penalize poor performance, revising profit policies and advancing the

share-in-savings concept, which would encourage and reward innovation and efficiencies, and revising payment terms because it will

be good for business, both government and the contractor. These

and other issues are covered in detail in our written testimony.

I would like to take the remainder of my time to answer some

specific questions that you posed in your invitational letter. You

asked, Has the Federal Government undertaken strategic planning

in its acquisition work force challenge? While good efforts have

been made with respect to hardware acquisition, unfortunately, we

don’t see the same evidence on the services side. Much more needs

to be done to train and attract good individuals in this field. As we

have seen, the Federal Government is increasing the amount of

services it purchases.

You asked to what extent the Federal Government used performance-based contracting. Many agencies are trying, particularly

OFPP and DOD, but the results are less than stellar. Performancebased contracting is a powerful tool to unleash the full creative capability of contractors and bring more efficient, cost-effective services to the government, but it is not easy to write a good performance-based RFP. And it’s even harder to evaluate competing proposals for award. But as long as we are wed to the old ways, telling

contractors how to do business rather than the outcomes you want,

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and an unwillingness to transfer process control from the government to the contractor, then the Federal Government will never

gain the best thinking that service companies have to offer under

performance-based contracting.

You’ve asked what barriers are there to share-in-savings contracting. Not enough contracts employ this splendid motivator for

improvement in savings. If share-in-savings is allowed, often it

doesn’t reach its potential because there’s an unwillingness on the

part of the government customer to permit the changes and to

transfer the process control to the contractor. Until contractors

have control of their processes and are held to performance-based

metrics, and the government stops telling how to do business rather than what they want, the shared savings will be inhibited.

You asked if the Federal Government’s developed best practices

for contracting. While there have been some attempts, they seem

to be the exception, not the rule. In Federal contracting procurement, we do not see the best practices and processes that we see

in our commercial private sector business, including the operational, financial, and contractual best practices. What we do see,

unfortunately, in Federal procurement is a lack of standardized

procurements and no uniform performance standards, even in common areas of service. Often this is only complicated by last-minute

changes in bid requirements.

Finally, I’d like to add one question, and that is: What can the

government do to reduce the cost of bidding and, therefore, increase competition? Bid and proposal dollars are limited within any

company and across the industry, but the cost of bidding seems to

keep escalating, which only dampens competition. And unlike some

of our brethren companies on the weapons systems sides, we don’t

get our bid and proposal costs covered directly.

But if we can find ways to reduce the costs of bidding, more companies can bid more contracts, which means better competition for

the government. There are a number of ways to consider holding

down the cost of bidding, which I would be happy to discuss in detail later rather than take any more time this morning.

So, again, thank you for the opportunity, Mr. Chairman and

members of the subcommittee.

[The prepared statement of Mr. Wagner follows:]

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Mr. THOMAS M. DAVIS OF VIRGINIA. Mr. Wagner, thank you very

much.

We will start the questioning with Mr. Schrock.

Mr. SCHROCK. Thank you, Mr. Chairman.

Gentlemen, thank you for being here. That was fascinating.

Mr. Cooper asked, one of the things he said, why won’t performance-based contracts be easy? I want to ask him about that. Mr.

Oliver said DOD can do performance-based contracts and likely

will by 2005, unless I misunderstood you. Mr. Drabkin, it sounds

like GSA is on its way to performance-based contracting. Dr.

Kelman says we don’t pay until we get results. That’s the whole

crux, I think. Mr. Mutek leans toward performance-based contracts, and Mr. Wagner said we need to reward good performance

and innovation.

I guess, to go back to Mr. Cooper, you said, why won’t performance-based contracts be easy? When I was in the Navy if I didn’t

perform, I didn’t get promoted. When I was a stockbroker, if I

didn’t perform, I didn’t get paid. Why can’t we do that in government?

Mr. COOPER. I think the difficulty, and the reason I said it won’t

be easy, is again related to whether we have a work force in place

that can implement that initiative and get the kind of results that

everyone’s looking for.

The concept of performance-based contracting goes back to the

1980’s. It’s been around a long time. Mr. Oliver mentioned that the

Department of Defense issued a guide, some guidance, in December

of just last year. We’re just starting to see some guidance and tools

being provided to the work force so that they can understand the

concept and the procedures that need to be followed, things like

having a very clearly defined work statement that is put forth in

terms of what the government needs, not telling the contractor how

to do it. The guidance also talks about a metrics for measuring

whether, in fact, the performance is achieved, and it talks about

having a performance assessment plan so that everyone understands how performance will be measured and how it will be translated into payment to the contractors.

So I guess what I’m trying to say is, until the work force gets

used to this new kind of contracting and starts employing that type

of contracting, it’s going to be a difficult challenge.

Mr. SCHROCK. Mr. Wagner, you said, following up on that, Mr.

Wagner, you said, why can’t we write a good performance-based

contract? My guess is Mr. Cooper outlined some of those. It’s just

we’re getting in the way? I mean, when I say ‘‘we,’’ I mean the Congress is getting in the way. Should we make it more simpler? Simpler, not more simpler, but make it simpler? And then when we do

it, just not try to nickel and dime them to death? Is that what is

causing all this?

Mr. WAGNER. Well, I think, first, you have to get there. What I

always like to say is, if you can measure it with a ruler, it’s not

a performance-based RFP. I think there are good ones out there.

In our business, base operations support, there are a lot of very

similar services out there. We need to, I think, find some templates

out there and share some things in terms of how you do that, what

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ual sites trying to reinvent the wheel and create this themselves.

There’s a lot of good stuff that’s out there in the private sector. I

think this needs to be disseminated and out there.

Now, certainly, with the metrics, it’s individual within the site,

but I do think that it is possible to do it. I just think it needs a

true commitment and a sharing of some of those best practices to

look where other people have done it and to look, reach out for

those examples.

Mr. SCHROCK. I agree. Thank you, Mr. Chairman.

Mr. THOMAS M. DAVIS OF VIRGINIA. Mr. Turner.

Mr. TURNER. Mr. Wagner, you mentioned that the experience in

share-in-savings and other contracting, innovative contracting techniques have not been very successful. Could you kind of bring this

down to sharing with us a good example of some place where it

really didn’t quite work but it was tried in the government?

Mr. WAGNER. We’ve got a share-in-savings contract in one of our

base operations support contracts out at Bangor sub-base in the

State of Washington. It’s in there. We have done some very innovative things to share some savings, but I do think that you’ve got

to have an attitude to want to make some real fundamental

changes out there. I think that’s the exception. We have a number

of base ops contracts; that’s the only one we have that even has a

share-in-savings provision in it. Again, I think it’s the exception,

not the rule.

When people are asked to be out there and be pioneers, frankly,

the contract community is sometimes risk-averse. You know,

they’re a little tentative to make some broad changes here. I think

we need to give them encouragement. I think we need to give them

air cover. I think we need to ask them, ‘‘Why not?’’ Rather than

say, ‘‘Where can you do this?’’ I think we’ve got to ask the question, ‘‘Why aren’t you doing it all over?’’ And make sure that it is something that we instill as the rule here.

Second, I think the share-in-savings is really important in our

commercial contracts where we have it. We’re kind of joined at the

hip with our partners. They want us to succeed, and we want them

to succeed, and we’re both very interested in making sure that both

succeed because, when we do, we drive down costs, as opposed to

oftentimes in the Federal Government the concern is oversight of

the contract and are you doing the things that we’re supposed to,

rather than trying to be out there and be innovative and truly both

be sharing in a partnership way.

There’s some good examples out there. I’m not painting a broadbrush over words, but those are some real fundamental things that

we’ve found in the commercial sector that makes the share-in-savings type of concept work.

Mr. TURNER. Maybe I ought to address this next question to Dr.

Kelman, but when you think in terms of utilizing share-in-savings

contracting in the government, what kind of things would distinguish between the use of those type of contracts in the government

and the utilization of those contracts in the private sector that

might be worthy of our consideration?

Mr. KELMAN. I think probably the biggest legal barriers involve

the implications of the annual funding process. In a share-in-savings contract you have a stream of benefit as the contractor makes

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an investment up front, and they’re not paid, or only paid a little

bit, up front. You wait until the government begins to see the benefits of that investment before the contractor gets paid. So the contractor has to get paid over a period of time based on the benefits

that are then sort of thrown out in the outyears, so to speak.

Well, of course, we run generally by an annual appropriations

cycle. Agencies generally don’t have no-year money. There are abilities that were instituted in the Acquisition Streamlining Act of

1994 to allow what’s called multiyear contracting, where you can

sign a contract now that gives you some commitment, let’s say, for

example, to share savings in the future.

Right now, though, under that multiyear contracting authority,

the agency needs to fund in advance any liabilities it might have

to cancel the contract. So that can often be a lot of money, and

that’s been an inhibition to agencies being willing to do share-insavings contracting.

There’s a congressional precedent in the act Congress passed in

1992 which created share-in-savings contracts for energy conservation in Federal buildings. That’s sort of one of the first uses of

share-in-savings. It wasn’t in the IT area. It was in a different

area. In that legislation Congress said in statute that the agency

did not have to fund these liabilities in advance; they could do the

multiyear contracting without those. I think Congress ought to seriously look at using that same or creating that same ability for

agencies in the area of share-in-savings in the information technology area or more broadly in the services area.

So that’s one difference, and that’s an issue the private sector

folks don’t have to worry about, that people in government get very

scared about because the Antideficiency Act is a criminal statute

and you’ll have the contracting people say, if I violate this, I’m off

to jail. And it gets a lot of them very scared about doing share-insavings contracting.

Mr. TURNER. Thank you, Mr. Chairman.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much.

Mr. Kelman, I read your statement. There you’re concerned that

the share-in-savings contracts could be used just because you don’t

have the current year money in some cases, and that’s really the

wrong utilization? It could certainly be a factor, but it would be the

wrong utilization.

There’s also the problem of contractors walking off with tremendous profits coming from some of these share-in-savings contracts,

which would be fine because you share the risk and there has to

be a good potential upside or you’re not going to get people in, but

then you get the public perception, when they hold up the ashtray

or something and say, ‘‘Gee, look what we’re paying for.’’ It’s subject to a lot of demagoguery. So I do think you do have to, as Mr.

Wagner said, you need to prop up some of these contracting officers

and some of these procurement officials to let them know this is

OK. Otherwise, a lot of this stuff will never get done. Is that a

fair——

Mr. KELMAN. Yes, I think we have to get away from the destructive attitude that says, in effect, it’s OK if the contractor performs

poorly or performs marginally, or whatever, as long as they don’t

make a lot of money. It’s almost like a lose/lose kind of approach

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that says, we don’t care if the contract doesn’t perform that well

as long as they don’t make too much money. We should instead be

trying to move toward a win/win environment where the contractor

makes more money the more they succeed on behalf of the taxpayer, on behalf of the—— Mr. THOMAS M. DAVIS OF VIRGINIA. It’s like a contingency almost?

Mr. KELMAN. Absolutely.

Mr. THOMAS M. DAVIS OF VIRGINIA. That’s what it’s like, a contingency fee in the law.

Mr. OLIVER. I don’t think that’s the problem right now.

Mr. THOMAS M. DAVIS OF VIRGINIA. Mr. Oliver.

Mr. OLIVER. I don’t think that’s the problem right now. I think

the problem is the legislation, as interpreted by the lawyers, is the

problem that Steve said. In other words, right now let’s say that

you have a contract that the government’s paying $40 million to do

right now, and some guys come in—and this is an actual example— and say, ‘‘I can do this for $12 million in 4 years.’’ I’m going to have to put up $50 million to make this work, but I’m going to make my

money back in 3 years, and I’d like to do this.

Now the problem is, since it’s an annual appropriation, when

they put their money up, after 3 years they’re actually doing this for, say, $23 million. You know, they’re on the slope down to 12.

Now the problem is, Does the contracting officer continue to pay

them $40 million to do $23 million of work? And what’s that termination liability that you had to put up front? In other words,

they’re going to put up $50 million. You have to put up $50 plus the $40 you’ve already spent. You’re spending $40 that year; you’ve

got to put up $50 more. You have to spend $90 million right up

front in order to get this.

So the problem is with our laws working against each other, and

I had to work this one out, and I worked this one out very difficultly. It was not that the contracting officers were unwilling to

do something new. It was that the law is not crafted well enough

to get past—to meet our lawyers and the other laws and to be effective.

Mr. KELMAN. Congressman Turner, there’s another difference between the public and private sector, which is that, of course, in the

private sector, if you generate savings, they go straight to your bottom line, or whatever; they stay within the organization.

There’s a widespread and not unjustified fear on the part of Federal Government folks that, if I generate savings in year 1, the

very next year, if OMB doesn’t take them all away from me, the

appropriators will. I don’t think you can deal with that by legislation, but I do think we need to be more creative in terms of essentially agreements, informal agreements, between appropriators,

OMB, and the agencies that, if they’re able to generate savings, let

them keep at least a portion of those in the outyears, so there’s not

in effect 100 percent taxation of the savings that they generate.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK. Interesting. It’s more

complicated than it sounds, but we can get at it a little bit.

OK, let me ask Mr. Cooper a couple of questions. In your testimony you indicate, in particular, agencies are not clearly defining

their requirements, fully considering alternative solutions, performVerDate 11-MAY-2000 11:14 Mar 27, 2002 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 C:\DOCS\77329.TXT HGOVREF1 PsN: HGOVREF1
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ing vigorous price analysis, and adequately overseeing contractor

performance. In your view, how can agencies do a better job of

achieving these goals? Beyond aggressive oversight, do you think

there’s a need for additional legislation?

Mr. COOPER. OK. The kind of things that you talked about are

fundamental, good contracting things. Seeking competition—— Mr. THOMAS M. DAVIS OF VIRGINIA. Best practices, basically?

Mr. COOPER. Yes. Evaluating prices, monitoring contractor performance. What we’re seeing in that is a multiple number of

causes. Let me give you an example.

We did a review of service purchases using the GSA Federal Supply Schedule. What we found in that situation is very little competition being employed by the contracting people and really a misunderstanding on the part of the contracting people on how to use

the schedule. Part of that stemmed from some special operating

procedures that basically said, you can’t use the schedule to buy

services like you do brand-name products. You just can’t go on the

schedule, look at a couple of prices, and know they’re good prices.

Mr. THOMAS M. DAVIS OF VIRGINIA. But that’s what they’re

doing, basically?

Mr. COOPER. That’s what they were doing.

Mr. THOMAS M. DAVIS OF VIRGINIA. And they’re comparing it in

terms of trying to get some comparison in competition with just

schedule prices.

Mr. COOPER. Well, it’s even worse than that. What we found was

that the program office who’s putting the requirement on the contracting community would get an estimate from its incumbent contractor about a level of effort in terms of number of labor hours and

mix of labor, and things like that, and then turn around and say

that was the basis for evaluating any prices. Well, normally, only

one price came in, and the price was exactly the same—— Mr. THOMAS M. DAVIS OF VIRGINIA. Sure.

Mr. COOPER [continuing]. As the statement of work. So they just

weren’t taking advantage of the benefits of competition.

Mr. THOMAS M. DAVIS OF VIRGINIA. Well, they’re comfortable

with the contract, isn’t that it? They’re comfortable with the contractor. They know this guy can produce. So what the heck?

Mr. COOPER. Absolutely. What we recommended in that effort is

that the special operating procedures that really talked about the

difference between services and products be put in the regulations,

and that is happening. So that should help.

But, just to give you an example—and, again, this goes back to

education and training of the work force—one of my colleagues just

attended a conference a week or so ago, had about 300 contracting

officers at the conference. He asked the contracting officers to show

a show of hands on how many people were aware of, and actually

used, those procedures. There was only a handful of hands that

came up in that conference. That’s pretty discouraging.

As far as legislation on that issue, hopefully, if these rules and

regulations get into the FAR and adequate training is done, hopefully, this problem will be mitigated in the future.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK. One of the big problems,

it looks like to me, continues to be not just training people in place,

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body can do this work. Some of the stuff anybody can do with appropriate education and training, but some of this stuff is pretty sophisticated. I mean, what kind of changes are we going to have to

make in personnel to get good people to come in and stay in the

business for a little bit and continue to train them and keep them

in the business as opposed to walking across the street where they

can double or triple their salary?

Dr. Kelman, you had an innovative idea about bringing people in

for short periods of time and moving them in and out. Can you give

me some help on that? I mean, what’s the best way over the long

term? I don’t know if we can pay people enough, given where we

are with the Federal pay schedule.

Mr. KELMAN. It’s interesting, Mr. Chairman, many of my students—not all of them, but many of them—if you sort of say to

them, ‘‘I’m going to start a job at age 23 in some organization, work

in that organization for 40 years and then retire,’’ whatever, they

look at you as if you come from another planet. A lot of the kids

today, that’s not their view of how they see their careers. They see

themselves working in a lot of different organizations.

Mr. THOMAS M. DAVIS OF VIRGINIA. But that’s Planet Government today. I mean, that’s kind of the way it works.

Mr. KELMAN. Well, I think what we need to do is find ways to

leverage that because I think there are a lot of young people who

would like to spend some time in public service but aren’t able or

willing to do a whole career in public service. Right now, generally,

people come into public service either at the entry level or at the

political level with very little in between. I think we need to do a

lot of things to make it more possible to allow people at, let’s say,

age 28, 29, 30 to come into government and do public service for

3 years at a mid-management level, a GS–13/14 kind of level, without the expectation that they’re going to spend their whole career

in the public sector. I think we need that.

Actually, I also believe that would have—if we can do that, in addition to getting smart kids or young people, it would have an additional positive function of exposing a larger number of Americans

to public service and to government, and do something about the

stereotypes that people have about folks who work in the Federal

Government. So I think we need to be very aggressive in thinking

about ways to rethink our whole career model to make a larger aspect of it, people coming in at mid-levels for a few years, doing public service without an expectation that they’re going to necessarily

stay for a career. We’ll also have some people stay for a career, but

I think right now we have almost nobody like that. We need to

start having some more like that.

Mr. THOMAS M. DAVIS OF VIRGINIA. Go ahead, please.

Mr. OLIVER. Demonstrating the power of Mr. Kelman’s ideas, the

Department of Defense has a legislative proposal in. We did it targeted for 11 and 12 and asked for the authority to do a pilot

project. So we would appreciate your assistance in this because we

think it’s a good idea and want to try it.

Mr. DRABKIN. More importantly, Mr. Chairman, I would point

out that there is no plan for the career folks in the 1102 and the

acquisition work force career series generally. We’ve just hired people and we bring them in. There’s no career path. There’s been no

81

planning for what to do with them in the mid-level of their career.

There’s been no planning what to do to retain them as they get to

the twilights of their Federal careers.

What we really need, at least on the civilian side of the house,

is a focus on doing the kind of planning you would do if you were

in a private business and wanted to make sure you had a stream

of well-qualified employees that handle the largest part of your

business. Private industry would tell you today that contracting

equals a minimum of 65 percent and in many cases 85 percent of

their dollars. That’s a big chunk of money, and we ought to spend

some time developing career paths for the people who spend it for

you.

Mr. MUTEK. Mr. Chairman? Two observations from industry:

First, there are certain dynamics that we see in the acquisition

work force today. With the human capital crisis and the aging of

the acquisition work force, there may be greater opportunity for upward mobility within the government in the very near future, and

that puts a premium on effective training.

The second observation is specific to the services industry. The

services sector of government acquisition has been, by and large,

a backwater for a long time. The most prestigious jobs are generally in the big systems, the high-visibility jobs, and as a result,

we’re seeing some of the issues today with the acquisition of services. As we see the consolidation of service requirements, the bundling, the A–76’s, we’re seeing some flawed procurements that not

only reflect lack of training, but also the attention to the service

acquisition work force.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK. I know Mr. Ose had a

couple of questions as well. I am going to get him, but I want to

keep it going. Mr. Turner, why don’t I go to you? Oh, I’m just waiting for him to come in. I will ask one more question while we’re

waiting for him to come out.

I will go back to Mr. Cooper. In a number of statements reviewed

by the subcommittee for this hearing, there has been an indication

that much of the problem with acquisition reform is due to the lack

of implementation in the changes seen in the early to mid-nineties.

I mean, there was a huge cultural change in many cases. In GAO’s

view, has lack of implementation been a deterrent in achieving the

comprehensive acquisition reform? Has the GAO reviewed what

portion of the agencies’ budgets are spent on work force training?

And have you reviewed the effectiveness of agencies’ training programs?

Mr. COOPER. OK. Let me make one thing very clear. GAO has

been very supportive of acquisition reform, the Federal Acquisition

Streamlining Act, the Clinger-Cohen Act. I think you’re exactly

right, Mr. Chairman, the implementation has not gone as smoothly

as everyone had hoped and we have not always gotten the benefits

from the reforms.

Having said that, we’ve heard a lot of other things said today

about where successes have occurred. The purchase card is a good

example. We can buy things a lot quicker. It costs a lot less to do

all those. All those are positive things.

As far as looking at the training budgets of agencies, only where

we have looked at that in any detail involves a report we did about

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a year ago on GSA and the VA. Those are the two largest civilian

purchasing organizations. We were looking at whether those agencies were complying with some of the provisions in Clinger-Cohen.

We did find problems there. They weren’t always identifying the

training that was in their budgeting documents for the work force.

There were incomplete records on whether the contracting personnel actually got the training and whether they got the required levels of training.

We are starting to do some broader work now, looking at work

force issues, and we’ll be exploring issues like training, recruiting,

retention, all those issues across the Federal Government. So a lot

remains to be done.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much. I have

some followup to that, but let me recognize Mr. Ose.

Mr. OSE. Thank you, Mr. Chairman. My questions are primarily

directed at Messrs. Cooper, Oliver, and Drabkin. We had a discussion in the last Congress about contracting officers being given the

responsibility of determining whether or not bidders or potential

contractors are eligible under what became known as black listing

regs or standards. I have seen the questions that the committee

proposed to you. Amongst all your other responsibilities, training,

evaluation, keeping current on new procurement practices, and

what have you, I am curious as to your respective opinions regarding the proposed black listing standards that came forward in the

last Congress.

Mr. OLIVER. I thought it was a terrible idea. There’s two problems with it. One is there are no agencies that maintain the kind

of records you’re supposed to check against to see whether or not

a various contractor had done something. And, second, the burden

that you’re adding to the contracting officer, who is a GS–9, who

is trying to award a contract and is asked to evaluate purported

behavior and compare it to, one, a standard—to be honest with

you, the behavior in each of the industries is different, and if one

spends time in it, one acquires that there’s a difference between

the garment industry and the transportation industry, and there

are various standards for each. To expect the contracting officer,

who is 27 years old and training to do a many other tasks that are

terribly important, so that we do not have any waste in the government, to also deal with items for which there are no records and

no agency that maintains an evaluation, I thought was extraordinarily difficult. I am very happy that rule has been held in abeyance.

Mr. DRABKIN. Mr. Ose, I would take it from a different approach.

We have already existent in the FAR and in statute any number

of ways to deal with contractors who violate the law. There are debarment proceedings. And if you take a look at the debarment list,

it’s a relatively long list; people are added regularly because they

violate the law or deal inappropriately with the government.

Almost every agency mentioned in the proposed regulation—well,

in the regulation that was implemented on January 19, almost

every agency who’s responsible for oversight of the laws, specifically mentioned the IRS, the EEOC, the Labor Department, have

their own independent authority to debar contractors who violate

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the substantive laws they’re responsible for administering. That

process exists.

If a contractor fails to perform and is terminated for default on

a contract, they’re automatically ineligible for the follow-on award.

They get past performance evaluations now which address their

ability in terms of current performance and which follow them in

future performance. There are so many current ways of dealing

with people who either violate the law or perform poorly that this

additional task, which involved an additional certification, an additional possibility that a contractor would be subject to Civil False

Claims Act litigation and possibly even criminal violations under

title 18 for making a false statement, was simply unnecessary. To

add that to the list of things that a contractor has to give us, it

wasn’t going to get us any additional benefit.

Mr. OSE. Mr. Cooper.

Mr. COOPER. I would agree with the two other government witnesses. There are adequate regulations in place now to deal with

bad contractors, and I think that’s adequate.

Mr. OSE. I just want to make sure, one of the things which always seems to be a divergence of opinion when you get a different

panel in here, and I want to make sure for the record—Mr. Cooper,

you’re the Director of Acquisition and Sourcing Management

for——

Mr. COOPER. Yes.

Mr. OSE [continuing]. The entire Federal Government?

Mr. COOPER. Yes, that’s correct.

Mr. OSE. OK, over at GAO.

Mr. COOPER. Right.

Mr. OSE. And, Mr. Oliver, you’re the Deputy Under Secretary of

Defense for Acquisition and Technology at DOD. So you do all of

that for the DOD?

And, Mr. Drabkin, you’re over at GSA in the Office of Government-wide Policy.

Are there others similar in stature in the Federal Government

that would have differing views that you’re aware that we might

need to visit with?

Mr. DRABKIN. I can tell you, based upon the result of what happened when we issued our deviation, that nearly every senior procurement executive in the civil side of government issued a deviation immediately after January 19, which I think speaks for how

they felt about that particular rule.

Mr. OSE. Thank you, Mr. Chairman.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you very much. Mr.

Turner.

Mr. TURNER. I have no further questions.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, good. Mr. Turner has no

further questions. I’ve got a few.

Let me go back to GAO for a minute. Well, let me just ask, did

you review the effectiveness of the agencies’ training programs?

Mr. COOPER. Not at DOD. Only in GSA and the VA. And there

we were looking more at the level of spending and whether the

Clinger-Cohen continuing education—— Mr. THOMAS M. DAVIS OF VIRGINIA. And it’s just a small sliver

they’re spending on training at this time?

84

Mr. COOPER. Right.

Mr. THOMAS M. DAVIS OF VIRGINIA. Which is understandable. I

mean, I do know how agencies work. But, clearly, there is a cost

to that. I think that is what everybody is saying.

Mr. COOPER. Absolutely.

Mr. THOMAS M. DAVIS OF VIRGINIA. DOD’s testimony indicates

that they are leading the way in the performance-based contracting, including having met the administration’s goal for 20 percent

performance-based contracting already. Have you reviewed DOD’s

efforts in that area?

Mr. COOPER. No, we have not yet. That’s a very recent phenomena, and I would applaud the DOD for moving out aggressively in

this area. I would issue a caution though. Measuring performancebased contracting by just the number of contract actions is not necessarily the best measure. I think what we’re really after here is

whether those performance-based contracts produce the outcome

that everybody wants.

Mr. THOMAS M. DAVIS OF VIRGINIA. Of course.

Mr. COOPER. And that’s what’s important.

Mr. THOMAS M. DAVIS OF VIRGINIA. Of course. Well, we might

ask you to look at that downstream. But at least they are being

proactive and they are championing this.

Mr. COOPER. Right. And with the new guide coming out in December, they’re all positive steps and they’re moving in the right

direction.

Mr. THOMAS M. DAVIS OF VIRGINIA. Well, let me go to DOD. In

your view, has the acquisition work force received sufficient training in the legislative changes made in the early nineties? And what

do you do to measure the success of your training efforts?

Mr. OLIVER. The measure of success will be how well we can put

in performance-based contracting, which is very difficult, and also

by what we see as results. I can’t do that right now.

Mr. THOMAS M. DAVIS OF VIRGINIA. I understand.

Mr. OLIVER. We’re really working very hard on improving the

training. I mean, we have the hours. Candidly, I’ve got the hours

required, and I think it’s the right number because it’s a number

that everybody in the industry uses, and we have meetings and everybody argues for fewer, which indicates to me that I’ve got it

about right.

My problem right now is the quality of them, and I’m not getting

the business school—I’ve been to a couple of business schools, and

I’m not getting the business school quality that I want. Now this

is related to the questions you were talking about upgrading the

force, where we put in requirements for essentially a college education, and we’re bringing in different people and requiring them

either to come in with a degree or gain a degree, because this business is getting much more difficult.

At the same time, we have to make the training better. It’s got

to be not only Web-based, it’s got to be really substantive. I was

talking to the president of the Defense Acquisition University and

his staff last week, and I said, ‘‘You know, I want this to be the

hardest school that anyone has ever attended. I want it to be so

difficult—I want it to be so dense that it’s rewarding. I want the

85

people to feel like they’re learning every second.’’ And we’re not

there yet, and we’ve got to get there.

Mr. THOMAS M. DAVIS OF VIRGINIA. It seems to me, if you get

there, then some of what Dr. Kelman talked about, bringing people

in from industry for a short period of time and training them, they

can go back out smarter than they ever were and get experience

they never could get otherwise. I think it makes their stay in government worthwhile—— Mr. OLIVER. No, I agree. In fact, that’s the reason we’re asking

you for this. We’re asking you for this pilot. We’ve also asked for

another pilot to send people out to industry and come back. I mean

the same sort of thing.

I go down and talk to the people. We bring in the Defense Acquisition University, we bring in many people from industry. I go

down and talk to each class that graduates, and then I hang

around and I smoke outside and wait for someone who smokes to

come out who’s from industry, and then I talk about what they

thought of it.

Mr. THOMAS M. DAVIS OF VIRGINIA. You’re only getting the smokers’ views? [Laughter.]

Mr. OLIVER. But they’re a higher quality group. [Laughter.]

Mr. THOMAS M. DAVIS OF VIRGINIA. Well, being from Virginia,

I’m not going to argue with you. [Laughter.]

Mr. OLIVER. And so what we’re trying to do is to reflect that and

upgrade the course so that we’re getting those right kind of people.

There’s a lot of effort going into this, but I won’t see the results

for a while.

Mr. COOPER. I’d like to again congratulate DOD because they

really are taking education of the work force very seriously. We

have done a substantial investment of resources in best practices

for major weapons programs, for example, and our reports are

being used now by the Defense Acquisition University to share that

knowledge and expand the understanding of some of those best

practices in the government work force.

Mr. THOMAS M. DAVIS OF VIRGINIA. All right. Let me ask a question. I am going to start with Mr. Drabkin, and then I will be

happy to hear from any of the rest of you—at least from Dr.

Kelman and Mr. Mutek and Mr. Wagner.

Would it be difficult for GSA to open their IT products, just IT

products and services, schedules to State and local governments?

Have you been asked to revisit cooperative purchasing for State

and local governments?

Mr. DRABKIN. The answer to your first question is no, if you

change the legislation. What objections the IT industry may have,

I don’t know. As you know, we got cooperative purchasing authority back, I believe, when FASA——

Mr. THOMAS M. DAVIS OF VIRGINIA. Correct.

Mr. DRABKIN. And shortly after we got it, a number of industry

groups were concerned about the impact providing access to State

and local governments would have on their markets, and they convinced Congress to withdraw that authority.

I’d like to suggest that we need more than cooperative purchasing with the States and local governments, though. I think this is

an opportunity, as we build the electronic marketplace of the fuVerDate 11-MAY-2000 11:14 Mar 27, 2002 Jkt 000000 PO 00000 Frm 00089 Fmt 6633 Sfmt 6633 C:\DOCS\77329.TXT HGOVREF1 PsN: HGOVREF1
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ture, for us to share with them the building of that marketplace.

There certainly is no sense in creating a Federal Government marketplace and a State and local government marketplace in the emarketplace.

I think there’s an opportunity for us to share training. Mr. Oliver

referred to what DAU is doing. Last summer FAI began working

with DAU to leverage what the two institutions are doing across

the entire enterprise of government. And, certainly, we could share

that same information and gain from the information State and

local governments have developed and share that across the whole

enterprise of government, from the local level all the way to the

Federal level.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK.

Mr. DRABKIN. So cooperative work with the State ought to include more than just purchasing. But if you change the statute,

we’ll make it happen, sir.

Mr. THOMAS M. DAVIS OF VIRGINIA. All right, that’s good. I’m

going to ask, Dr. Kelman, you were imminently involved with this.

Mr. KELMAN. Yes. Cooperative purchasing was a good idea when

it was first passed, and it’s a good idea today. It is a fully voluntary

program that simply opens up to State and local governments the

option, if GSA prices are better or the warranty is better, or if they

find it a more advantageous way to buy products than whatever

other contract vehicles they have available, it says you may do this.

No requirement, no regulation.

Mr. THOMAS M. DAVIS OF VIRGINIA. Let me ask you, there were

two objections, one of them from the middle guys who were selling

on commission to State and local governments, and they get cut out

of it. They got organized and everything. But by doing it to IT services, you eliminate that argument.

Second, not services again, but there are products that are sold

at discounts to the Federal Government that different manufacturers don’t want to sell at discounts to State and local governments

because they can continue to gauge them, and I understand that.

We’re realists. But you really don’t get that on the services level.

It seems to me, if we can satisfy that—I’ve already had some

meetings with some of the groups that opposed it—and just say,

look, we just want to do this for services contracts, it makes a lot

of sense here, and we’re working on that.

Mr. KELMAN. Interesting. That might be a good way to go, given

some of the objections last time. I do think that, to some extent,

this really comes to what I see as the basic tradition of this committee. I mean, this committee has traditionally served as a taxpayer guardian, and there are a lot of special interests in this

town, a lot of special interests out there. I just think it is in the

best traditions of what this committee stands for as a taxpayer

guardian, in this case a guardian of State and local taxpayers, but

they’re the same folks; they’re the same citizens—to provide as

many options as they can for getting a good deal.

Mr. THOMAS M. DAVIS OF VIRGINIA. And, also, State and local

governments many times are not as sophisticated in their procurement rules and regulations. This just makes it a lot easier for them

to get something cheaper, faster, and everything else.

Mr. Mutek and Mr. Wagner, care to comment?

87

Mr. WAGNER. Sure. Mr. Chairman, this is very similar to the collaborative purchasing concepts that are being seen in industry

right now. We’ve shown a great interest in this. We have been collaborating with even our competitors to achieve economies of

scales, and eventually the government reaps the benefits.

A difference, of course, is that we’re generally looking in collaborative purchasing with commodities, and services is different. You

could look at a range of services that are almost commodity-like,

but there is the issue of best value and tailoring the service for

your needs that needs to be considered.

The objections that have been raised usually come out from

smaller businesses, some of the same type of objections that Dr.

Kelman talked about during his discussion on bundling. Those objections are real and need to be considered, impact on smaller businesses.

Mr. THOMAS M. DAVIS OF VIRGINIA. But smaller businesses can

get on the schedule and it can allow them to grow.

Mr. WAGNER. Yes.

Mr. THOMAS M. DAVIS OF VIRGINIA. I mean, the point here is

that this allows you to kind of get on television to the people that

you are selling to. Otherwise, State governments are already putting up their own schedules, and it’s very inefficient, it seems to

me.

Mr. Wagner.

Mr. WAGNER. There are some other areas, too, beyond, I think,

even IT. Dr. Kelman spoke before about energy-saving performance

contracting, and there are a number of energy service companies

out there that have been approached by State agencies saying,

‘‘Can we use those Federal contracts because you’ve done them; you

know how to do them.’’ They’re fairly complicated, and they want

to take advantage of that.

So I might just say that, if we look toward that, we may not

want to just limit it to the IT schedules and all their other avenues

that I think benefits to the Federal procurement base that might

be advantageous for States to use as well.

Mr. KELMAN. This might be an opportune time, because of the

energy situation, to take advantage of that opportunity to help the

States and localities out by giving them access to those forms of

contracts.

Mr. THOMAS M. DAVIS OF VIRGINIA. We tried to do that with Y2K

compliance problems, and we got stiffed by the drug companies.

But I hear you. This is an opportune time at least to put it forward

and give Members an opportunity to vote it up or down.

Mr. DRABKIN. One other point, Mr. Chairman, is that I get a call

at least once a day from someone in a State or local government

asking to get access to our schedule. So I’m sure you’ll find support

in the State delegations if they turn to their constituents.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK. Let me ask—Mr. Ose,

do you want to ask another question or two?

Mr. OSE. Yes.

Mr. THOMAS M. DAVIS OF VIRGINIA. Then I still have a few more

and then I will get us out of here at a reasonable time.

88

Mr. OSE. I want to go back to this question on the black listing

issue. I just want to make sure I’ve got a clear understanding of

Mr. Cooper, Mr. Oliver, and Mr. Drabkin’s credentials.

One issue that might come up here, and I’m anticipating, given

your unanimous opposition to the rule that came out January 19— Mr. Cooper, you’re not a political appointee? You’re permanent Federal Government?

Mr. COOPER. Career service.

Mr. OSE. Mr. Oliver, same with you? You’re a political appointee?

Mr. THOMAS M. DAVIS OF VIRGINIA. Are you saying they can’t get

fired if they give the right answer or wrong answer on this?

[Laughter.]

Mr. OSE. I don’t know. They can get fired for whatever they

want.

Mr. Drabkin, are you—— Mr. OLIVER. I’m a political appointee.

Mr. OSE. You are or you are not?

Mr. OLIVER. I’m a political appointee.

Mr. OSE. You are? OK. Now when did you come to the Federal

Government?

Mr. OLIVER. Three years ago, sir.

Mr. OSE. So you didn’t come with this administration, the current administration?

Mr. OLIVER. That’s correct.

Mr. OSE. OK. Mr. Drabkin, are you a political appointee?

Mr. DRABKIN. No, sir, I’m a career employee.

Mr. OSE. Now you are also on the FAR Council, are you not?

Mr. DRABKIN. I am one of the three FAR signatories.

Mr. OSE. OK, and the three signatories to the FAR Council, what

is the role that they play?

Mr. DRABKIN. Title 41 establishes a scheme for the development

of acquisition policy across the Federal Government. It created the

FAR Council, chaired by the Administrator of OFPP, and then on

the Council are the representatives of the Secretary of Defense, the

Administrator of NASA, and the Administrator of GSA.

They’re responsible in the first instance for generating procurement policy for the entire Federal Government. Of course, there’s

a role that OFPP plays both in chairing the Council and initiating

the President’s agenda on procurement policy.

Mr. OSE. OK. The reason I bring this up, Mr. Chairman, is a

week from now or a month from now, or whatever, I just didn’t

want to hear that the testimony we had received today had been

orchestrated, if you will.

Mr. DRABKIN. Mr. Ose, I would also point out that we’re in a period of time right now where we are accepting comments on the

proposals to change the rule. We plan to hold a public meeting——

Mr. OSE. I understand.

Mr. DRABKIN [continuing]. Later next month. In terms of my position, my position will be swayed by the weight of the comments

and what the right thing to do is. I’m not saying at this moment

that I’ve made up my mind in terms of what to do with the rule.

Obviously, I need to wait and hear the comments, and, plus, we

await political leadership from the White House when the Administrator of OFPP is confirmed.

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Mr. OSE. OK, we will proceed with that caveat. I just want to be

clear that I have felt that the proposal that did come forward from

Ms. Lee’s organization as inappropriate from its outset, and I am

pleased to hear the breadth of concern that was expressed here

today.

Mr. DRABKIN. I think it would be unfair to characterize that proposal as coming from Ms. Lee.

Mr. OSE. I stand corrected.

Mr. OLIVER. Particularly since I’ve now hired her at the Department of Defense. [Laughter.]

Mr. OSE. Mr. Drabkin, your point is well made.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you. Let me ask, Dr.

Kelman, turning to you for just a few questions. Let me start by

saying we not only have a problem with procurement officials not

getting the right training and attracting and retaining them, but

even when it comes to performing duties within government. So

much outsource is going out today because we don’t have in-house

capability to do that. Is that fair?

Mr. KELMAN. Yes. I think most of the outsourcing that takes

place I think takes place because it’s more appropriate to be

outsourced. I mean, for the vast majority I don’t think is an issue

of, you know, lack of skills, or skills, whatever, in the government,

but just these are the kinds that are most appropriately performed

by the private sector.

Sometimes I think, particularly in some of the IT areas where

it’s very difficult for the government to get especially entry-level

talent, programmers, people who do a lot of stuff, that’s another

reason to outsource.

Mr. THOMAS M. DAVIS OF VIRGINIA. I just wonder long term, I

mean, I don’t know—that’s another problem for government in

terms of having the resources to hire and retain people. Because,

if nothing else, having a governmental component that can perform

these services keeps the private sector honest, doesn’t it? You can

always bring it in-house if you can’t perform inside.

Mr. KELMAN. I think as long as we have a very competitive—in

the IT area, you know from northern Virginia, it’s a

hypercompetitive industry. There’s no shortage of world-class suppliers trying to deal with the government. In fact, one of the positive results of procurement reform is that, because we’ve made the

government be more commercial and lowered the barriers to entry,

more new high-tech firms are entering the government marketplace more quickly than they did before.

So I guess the worry I would have, or the issue I would raise,

is not so much that we need to keep a bunch of programmers inhouse and data base managers, and stuff like that, to keep the private sector honest, because the private sector competitors will keep

the private sector honest. I do think that we need to be concerned

about it, and I have a few thoughts in that area, about how do you

monitor a contractor who is doing programmer or data base management, or whatever, if you have no programming or data base expertise in-house. That’s a tougher one.

Mr. THOMAS M. DAVIS OF VIRGINIA. Yes, that’s a whole other— that’s where you get your losses financially because you can’t monitor.

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Let me go to Mr. Wagner and then back to Mr. Oliver.

Mr. WAGNER. I might add that nothing keeps us working harder

and trying to please the customer than knowing that 2 years from

now our competitors are nipping at our heels and would love to

take whatever contract we have away from us. It is an extremely

competitive environment out there in the private sector, and I

think that’s what drives innovation and cost savings in the long

run, is knowing that we’ve got to do a better job the next time we

bid this contract because there is vigorous competition out there.

Mr. THOMAS M. DAVIS OF VIRGINIA. I view this committee’s role

as not being pro-contractor or anti-contractor or pro any type of

thing, but, basically, just making sure the taxpayers get the best

value for their dollar. Competition is the best way to do that. I

think we can agree on that. We try to write rules that make sure

we are getting as many efficiencies as we can. Sometimes that may

mean moving things in-house; sometimes it means outsourcing

them, but most of all it means having a procurement system that

works, so you can drive down and bring competition to cost.

From some of the testimony today, we are finding out we are not

always using what is available to us in terms of soliciting other

bids and the like.

Mr. OLIVER. Mr. Chairman, I’m a contemporary of Willie Mays,

but I’m not sure that my baseball skills kept him on the edge

throughout his career. I’m similarly not sure that keeping the IT

capability inside Defense, for example, keeps the industry on edge

and moving on.

I think this is really a key component because me having a specialist in Ada who has worked for the government for 40 years does

not help me evaluate, does not help anybody evaluate a C++ solution that a couple of contractors are bringing forward. In fact, I

have watched this happen because I was in industry before, and I

watched this happen. What truly happened was, if you had a government person on the evaluation team, then you went to him, you

looked at him and looked at his background and said, ‘‘What is it

he’s comfortable with?’’ He’s comfortable with Ada. Then let’s bid

this in Ada. Even though it cost the government 30 percent more,

we’re both going to do it so we can get his vote, so he doesn’t say

there’s so much risk in the software. We are going to bid a nonstate-of-the-art proposal because we want to have the bid. This is

really an important area. This is really key.

Mr. THOMAS M. DAVIS OF VIRGINIA. But that goes back to the

lack of in-depth experience in government, doesn’t it?

Mr. OLIVER. No, this is really hard. I think this goes back to that

this is an area in which industry has just gone away like this. So

the question is not so much how I’d better get people to do that,

but how I can attach onto that.

For example, see, I would take Steve’s point. What I’d like to do

in this area is go out and take somebody who’s 40, 45, 50 who’s retired from the industry——

Mr. THOMAS M. DAVIS OF VIRGINIA. Now you’re saying particularly in the IT sector?

Mr. OLIVER. IT is really funny. Yes, I’m saying this is really——

Mr. THOMAS M. DAVIS OF VIRGINIA. OK.

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Mr. OLIVER [continuing]. An interesting area because it’s gone up

so much and the salary’s gone up. For example, I’ve talked to most

of the major industries and say to them, ‘‘I think you ought to

outsource all that from Lockheed-Martin.’’ I mean, in other words,

break it off so that it’s not subject to your payscales, same problem,

whatever industry, and then bring back some guys who are 40 or

50 years old from industry and bring them back and they’re your

supervisors of this. I think IT is a particularly difficult one, and I

just don’t want to let go by that this is important to have a government, a strong government organization exist.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, I think your point is

well taken. I appreciate that because this has to do with other legislation we have pending, and I appreciate hearing from you.

Mr. KELMAN. There are two strategies for how you might go

about doing the appropriate oversight or working with a contractor

in a highly technical area like IT. First of all, the more you have

performance-based work statement, you want to get away from

micromanagement, telling the contractor how to do it, but you do

need some expertise to evaluate proposals and some other things.

I agree with Dave; I think that rather than saying the traditional

idea is we have a bunch of programmers, we have a bunch of data

base managers, we have a bunch of working-level IT folks who then

get promoted internally within the government to a situation

where they then oversee contractors—let’s get rid, by and large, of

that working-level data base management, programmer group and,

instead, hire people at a 13 or 14 level maybe for a few years who

have already developed the expertise in industry. They may only

stay for a few years. It may be part of a career trajectory, whatever. Get the expertise from there.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, your point is well taken.

Mr. MUTEK. Mr. Chairman, one issue is the proper role of competition. All too frequently we hear that frequent competition keeps

industry honest. In reality, particularly in the services, there’s a

real benefit in looking at longer-term contracts and forgoing frequent recompetitions to gain benefits. A lot of the service contracts

we’re talking about are similar to the outsourcing agreements that

private industry does. We’ve learned that there are investments

made by the company that’s doing the outsourcing and it takes

time to recoup the benefits. It leads to a more stable work force.

It cuts the cost of frequent recompetition. It also develops a partner

relationship, a closer relationship. This really allows performancebased acquisitions to provide great benefits to the company that engages in this and to the government, if it were to use this.

We haven’t seen much in this area of partnering, although a lot

of usefule tools have come about, award terms, various types of incentives. Longer-term contracts might be a good way to go. That

would make us relook at the cost of frequent recompetitions.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, thank you. Mr. Wagner,

you made similar comments in your opening statement.

I will try to move through this quickly. Dr. Kelman, you are asking that OMB, in cooperation with GSA, work actively with agencies to seek out share-in-savings opportunities. Are there specific

examples of the share-in-savings contracting approach that agencies might emulate?

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Mr. KELMAN. Are you talking about types of contract areas?

Mr. THOMAS M. DAVIS OF VIRGINIA. Yes, yes.

Mr. KELMAN. One of the big ones—and Dave Oliver referred to

it before—is logistics modernization in the Defense Department,

where you have enormous savings in terms of number of parts you

need to keep in stock, these enormous warehouses filled with stuff

that gets on ‘‘60 Minutes’’ every once in a while, and the GAO folks

go to investigate. If you had a state-of-the-art logistics system, you

could take a lot of those extra parts, and so forth, out of the system, generating enormous savings. All the services, in my view, in

DOD really should be pursuing share-in-savings as a way to bring

their logistic systems from 1960’s technology to turn-of-the-century

technology.

The second big area is various kinds of business process reengineering—— Mr. THOMAS M. DAVIS OF VIRGINIA. You might not have gotten

the bids coming out of the private sector to do that kind of thing,

10 or 15 years ago. It was risky. We weren’t sure where the science

was going. But today I think there is a consensus that the private

sector could respond to that.

Mr. KELMAN. Right. The interesting thing there, Mr. Chairman,

is that logistics is a classic example of a commercial function that

is a way that commercial firms like a Wal-Mart or, obviously, UPS

or FedEx, it’s essential to the way they compete. There’s a lot of

progress on that in the commercial marketplace that the government ought to be taking advantage of using commercial companies.

And the government is learning. Like to tell just a brief anecdote,

I was at a thing where the Defense Logistics Agency was preparing

for their business systems modernization contract, which they’ve

since awarded, and it is a performance-based contract for major logistics modernization there. It was a meeting with various potential bidders, and they asked for people’s names and phone numbers. They were very interested in getting the commercial side of

these various firms’ operations, not the government side. I’m convinced that they were very carefully looking at the area codes that

all the people gave—no offense—to make sure there were no 703’s,

no 202’s, and 301’s. They wanted 650’s and 415’s and 312’s, and so

forth. They wanted the commercial side of these businesses. So I

think there are real opportunities there, as in the broad area of

business process re-engineering.

Mr. THOMAS M. DAVIS OF VIRGINIA. All right, thank you very

much.

Mr. Mutek, let me ask a couple of questions for you. In your testimony you cite the need for better acquisition work force training.

In your experience have the civilian agencies or DOD actively tried

to coordinate with the private sector to ensure that training goals

are consistent with the problems that you observe as a Federal contractor?

Mr. MUTEK. The PSC has cooperated with DOD, and we have an

ongoing relationship with them. Also, we have begun discussions

with GSA about training, coordinating training opportunities.

Mr. THOMAS M. DAVIS OF VIRGINIA. I would just say to both

agencies, I think that’s very important that we coordinate with private sector on these issues and that we are talking to each other

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as you arrive at your—not necessarily let them dictate it, but you

can learn a lot by talking to your customer on this. We can pass

all the laws we want, but if we don’t have the appropriate training

going up the ladder, nothing else is going to work. We are seeing

that going back to FASA.

You indicated that Congress has to make a determined effort to

ensure that training resources are available and are a top priority

among all agencies of government, particularly in the civilian agencies. Are any specific training opportunities available in the commercial marketplace that you would recommend for Federal employees?

Mr. MUTEK. The PSC would like to get back to you with a memo

on that.

Mr. THOMAS M. DAVIS OF VIRGINIA. That would be great.

Mr. MUTEK. There are significant opportunities, and the bottom

line is it is very easy to quickly eliminate that line item, save some

money, and it’s not being done.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, and we’ll let you get

back and keep the record open on that.

Let me just move to Mr. Wagner. In your testimony you note

that there are still many private sector companies that are unwilling to contract with the government. Do you have examples of specific companies or a specific example that made a decision not to

work with the government and what regulations might have driven

that decision?

Mr. WAGNER. I think generally——

Mr. THOMAS M. DAVIS OF VIRGINIA. We will allow you to supplement this if you would like to come back to it.

Mr. WAGNER. Sure. We would be happy to.

But I think generally a lot of it is the accounting requirements

that are imposed by the Federal procurement regulations. Frankly,

I think the profit margins as well are looked at. In some places

they’re very competitive and they’re thin. Right now in that particular sector if the private sector is booming, where you put your

investment capital, if you will, to bid jobs often goes to the private

sector, if you’ve got to choose.

I think another thing that is very daunting in Federal procurement is the length of time the procurements are taking. Not only

do they cost more to bid, they are taking longer to bid, and bid decisions are taking longer. What that does is it ties up our investment capital, if you will, because we’re waiting for those decisions.

Tell me if I’ve won or lost. Just let me get me on to the next bid.

And we can’t often do that because decisions are dragged out.

Mr. THOMAS M. DAVIS OF VIRGINIA. Well, that’s important because the markups are not as big at the government level as you

get in the commercial sector, by and large.

Mr. WAGNER. Right. So right now we have got a dozen contracts

out there and we’re waiting for bid. Once we find out, we can turn

over and go bid some more, but it’s difficult when your basically

venture capital is tied up waiting out there for decisions.

Mr. THOMAS M. DAVIS OF VIRGINIA. So I think what you’re saying is that longer contract periods in the commercial sector comes

with commensurate financial benefits to the customer as well?

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Mr. WAGNER. Yes, definitely. On the longer-term side, it allows

us to make investments in equipment, vehicles, software, things

that we wouldn’t do on a 5-year. We have got one 10-year base operations support contract. Trust me, we can make investments

there that we can’t on 3 to 5-year-type contracts.

Mr. THOMAS M. DAVIS OF VIRGINIA. Even with people, too, I

guess?

Mr. WAGNER. Pardon?

Mr. THOMAS M. DAVIS OF VIRGINIA. People as well as the——

Mr. WAGNER. Yes, and people as well.

The other thing it does is on share-in-savings, I think it’s very

important if you’re going to do that. Because if I’m in the 3rd or

4th year on a contract, am I going to propose share-in-savings

ideas, a value engineering-type thing, if it’s not going to pan out.

But if I’ve got a 10-year horizon out there, it may be very advantageous for me to suggest those type of ideas that can really pay

off in the long run for both the customer and the contractor.

Mr. THOMAS M. DAVIS OF VIRGINIA. I think it is important, if we

move to share-in-savings, that we make the first few work, be very

successful, if we’re going to lure the private sector in. I mean, starting out and losing patience after 3 years and going into some kind

of cancellation would be awful in terms of the message it would

send to the private sector bidders. Do you agree with that?

Mr. WAGNER. We’ve got some specific examples on a contract

that I will submit to the committee.

Mr. THOMAS M. DAVIS OF VIRGINIA. The last question for you is,

you stated that award term contracts is an innovative concept that

guarantees the needs of the government while giving the contractor

an incentive to achieve or exceed the agreed-upon performance.

Could you try to provide us with some real-life examples that

might be employed in the commercial world?

Mr. WAGNER. Certainly.

Mr. THOMAS M. DAVIS OF VIRGINIA. You don’t have to do it today,

but you could supplement it.

I also want to ask, in your testimony you noted the importance

of medium-sized businesses in the Federal marketplace. It’s an important question.

Mr. WAGNER. Yes.

Mr. THOMAS M. DAVIS OF VIRGINIA. I’ve noted with concern the

shrinking marketplace for mid-size companies. We even had a midsized company we talked to where they got a solicitation from a

large company saying, basically, you guys are toast; come with us,

acknowledging this and giving them a buyout offer. Have you seen

the same trend within CSA? Do you have any suggestions for highlighting the innovations that these unique mid-sized companies

bring to the Federal marketplace?

Mr. WAGNER. Well, I think it’s——

Mr. THOMAS M. DAVIS OF VIRGINIA. Recognizing your organization is large and——

Mr. WAGNER. Yes, we are a large business, and oftentimes with

the small businesses, you know, the grass is always greener in

terms of contracts. At times my colleagues that are in those midsized businesses are almost caught in between. They can’t go after

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the set-aside contracts, and sometimes they find it difficult to compete on some larger package contracts.

I do think that’s something that we need to constantly be aware

of. The thing is, as we structure certain contracts and put scopes

of work together, what we find is that we team with a lot of contracts in a certain expertise in a certain area. So we’re always looking out there for teammates and going after large contracts, because often we don’t even do everything ourselves. So I do think

it’s a question of looking at that.

That might be something to do from an overall standpoint, too,

from any agencies looking at their acquisitions overall, saying, ‘‘Do

we have the right mix out there? Do we have a split?’’ Last, I would like to add, the worst thing that can happen is, if

a procurement is out there and it’s coming, many of us watch opportunities out there for 2 years in advance and spend resources

looking and preparing to go after that. Then if there’s a change in

the procurement—oftentimes they’re set aside at the last minute or

something changes—the rug feels like it gets pulled out from the

company, either way, if it’s not set aside or if it is. I think that’s

very detrimental to the process, too, like any other companies, we

have to plan. Last-minute changes are very difficult to be able to

do that for any company.

Mr. THOMAS M. DAVIS OF VIRGINIA. My last question, and it’s

kind of to everybody, and I’ll start with you, Dr. Kelman. This has

just gotten me for years. The thing I like about share-in-savings

and performance-based contracts is you allow the companies to run

it the way they want to run it. In so many government contracts

you’ve got auditors over telling what’s G&A and what’s overhead.

Sometimes what the government may feel are appropriate incentives, the private sector has long since moved beyond.

I’ll just give an example. In one company I worked with we had

a great Christmas party every year. We had the Beach Boys 1 year.

I’ll never forget the—— Mr. WAGNER. The Cowsills.

Mr. THOMAS M. DAVIS OF VIRGINIA. We never got the Cowsills.

[Laughter.]

But we got a lot of the groups. We had the Shirelles. I can go

through it. They had the Four Tops a couple of times. [Laughter.]

I will never forget the government auditor coming in, reviewing

it, and saying, reminding me he had a cash bar at his Christmas

party, and then it was reduced to $50. But, you know, that was a

huge retention issue. Everybody knew that Adtech had the great

Christmas party, and it was a huge recruiting vehicle for us. Now

you make these employee award ceremonies and they try to jazz

it up a little bit.

But why does the government, what incentivizes people? Why are

they smarter than the people that are out there trying to hire people in the competitive marketplace?

It seems to me I think the FARs go overboard on this, in my

opinion, but the nice thing about the share-in-savings and performance-based is, basically, don’t they, wouldn’t they allow these companies to spend their money the way they want to?

Mr. KELMAN. Right. And one of the features of a share-in-savings

as a kind of contract is a form of firm-fixed-price contract, and

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there’s an established schedule of payment to contractor. Firmfixed-price contracts do not involve auditors at all. Just that’s the

way firm-fixed-price contracts work in general.

Mr. THOMAS M. DAVIS OF VIRGINIA. There’s a lot of money just

not having to put up with all the auditing for the private sector.

Mr. WAGNER. Mr. Chairman, in our share-in-savings contracts

we provide bonuses to the employees who come up with the ideas.

So we share down the line with them, and that’s a tremendous incentive for them to come up with ideas, the people who are out in

the field doing the work, if you will. I might suggest that maybe

we think about that on the government side, too, here. Award people to come up with savings ideas. It happens in the private sector.

Mr. THOMAS M. DAVIS OF VIRGINIA. Absolutely. We did that in

Fairfax when I was there, and we got some of our best ideas downstream a little bit and saved actually a lot of money with that, that

people might not have come forward with otherwise.

Anybody want to add anything? Yes?

Mr. DRABKIN. Mr. Chairman, part of the problem is we’re changing from a culture where, as a result of ill wind in the mid-eighties,

we were concerned about every expenditure a contractor made and

we were concerned with telling them how to do their work and

tying expenditures to work. As we move to performance-based contracting and fixed-price-type arrangements, what we ought to be focusing on is the outcome and how we measure it to make sure

we’re getting what we paid for. So what they spend their money

on is up to them. Their challenge is to be price competitive, along

with value, with the other people in the marketplace. If they want

to spend their money on parties, then that’s OK as long as they

make it up someplace else, so that the best value comes to the government.

Mr. THOMAS M. DAVIS OF VIRGINIA. OK, thank you. Mr. Oliver

and then Mr. Cooper.

Mr. OLIVER. Yes, sir. I would really encourage you to—I think all

of us believe share-in-savings is the right way to go. It’s not properly constructed legally right now. It doesn’t work in the Department of Defense, and I would encourage your staff to talk to OMB

and the Office of Federal Procurement Policy and my staff. We’ll

all be happy to help. We’ve been trying this really hard, and I’d

like to help you point out things that we think are causing us problems.

Mr. THOMAS M. DAVIS OF VIRGINIA. Well, we would like to work

with all of you on this, on something that really works. I know Mr.

Turner is interested in doing this as well, and come up with something between us that we can move rather quickly. So we appreciate your comments today, but we’ll, I think, flag some of this language by you to see what works as well, through your organizations. We very much appreciate your being here.

Mr. Cooper, do you want to add anything, have the last word

here?

Mr. COOPER. Well, as the only auditor at the table, I feel compelled to at least comment on your observation. Clearly, if the government can get its needs met through commercial products and

services, the kinds of things that you’re talking about, Christmas

parties and other things, don’t become issues. But there remains a

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significant part of procurement on a sole-source basis. In that situation, the taxpayers’ interests have to be protected.

I’ve spent 17 years looking at contracting, and I’ve seen all kinds

of abuses. I even testified on a beer can collectors’ club at McDonnell Douglas one time.

But, anyway, I think Mr. Drabkin made a very astute observation, and that is, we are going through a transformation and we

are going to rely more on commercial products and services. The

extent that we do that, then we don’t have to worry about the auditors coming in and looking at Christmas parties and other kinds

of things.

Mr. THOMAS M. DAVIS OF VIRGINIA. Thank you all very much. I

appreciate it. I think this is very helpful to us. We expect some legislation to come out of this, and we hope to continue dialog with

the different organizations.

Before we close, I just want to take a moment, again, to thank

everybody for attending this important oversight hearing. I want to

thank the witnesses. I want to thank Representative Turner and

other members for participating. I also want to thank my staff for

organizing it. I think it has been very productive.

I will enter into the record the briefing memo distributed to subcommittee members.

We will hold the record open for 2 weeks for anything you would

like to supplement and for those who may want to forward submissions for possible inclusion. Anybody who was excluded today from

the hearing who would like to forward anything, we would be

happy to have that in the record as well.

These proceedings are closed.

[Whereupon, at 12 noon, the subcommittee was adjourned, to reconvene at the call of the Chair.]

[The prepared statement of Hon. Jim Turner and additional information submitted for the hearing record follow:]

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