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What did I tell you?

Posted by Vern Edwards, 22 July 2010 · 2,166 views

Every now and then somebody comes along and proves your point for you in a wonderful way. Earlier this week I wrote about gimmicky reform "initiatives." Now I have learned that as the outgoing OMB director prepares to leave office he has published a memo that claims great success for the Obama administration?s acquisition waste reduction initiatives. You can see it at www.whitehouse.gov/omb/assets/blog/Update_on_Contracting_Reforms.pdf. Here are some of its claims:

  • In the first two quarters of FY 2010, the percentage of dollars awarded in new contracts without competition dropped by 10 percent when compared to the same time period in FY 2009.

  • Use of new competitively awarded contracts in FY 2010 that received only one bid dropped by 2 percent when compared to the first two quarters of FY 2009.

  • Fifteen of the 24 agencies covered by the Chief Financial Officers Act (CFO Act) ? the largest contracting agencies in the Federal government ? reduced their percentage of dollars awarded in new noncompetitive contracts or competitive contracts receiving only one bid by at least 10 percent.

  • In the first half of FY 2010, the percentage of dollars awarded in new T&M/LH contracts dropped by 7 percent when compared to the same time period in FY 2009, and the percentage of dollars awarded in new cost-reimbursement contracts dropped by 6 percent.

  • Seventeen of the 24 CFO Act agencies reduced their percentage of dollars awarded in new T&M/LH or cost-reimbursement contracts by at least 10 percent. Agencies are achieving these reductions through the implementation of sound contracting practices such as peer reviews and contract review boards that bring seasoned contract and other experts together to help contracting and program offices identify and address high risk practices.

All those facts are good news, I guess. But are we supposed to believe that those wonderful things (if, indeed, they are good) are evidence that the president?s memos have had the desired and a lasting effect? In any case, we could ask a lot of probing questions about those numbers and what they indicate, but why bother? We won't get answers.

Sorry, but I think the OMB memo is a classic illustration of what logicians and rhetoricians call the ?post hoc? fallacy⎯post hoc ergo propter hoc, that is, because one event happened after another we can conclude that the second event was caused by the first. See http://www.skepdic.com/posthoc.html. Non sequitur. http://www.skepdic.c...onsequitur.html. We don?t know why the statistics are different, but since it takes a long time to plan and award contracts, I am skeptical that the statistics prove that a couple of presidential memos are the reason for the changes in the numbers. (If only it were that easy!) There could be any number of reasons for differences from one year to the next, forces at work entirely independent of the president?s wishes. Moreover, even if the changes were the product of the president?s memos, we are a long way from knowing that we have seen a lasting change in the way we?re doing business.

The memo makes other claims:

The Military OneSource Program contracts with vendors to provide a variety of support services to military personnel and their families. These contracts have not been competed since the program was established shortly after 9/11. Recognizing the many pressing requirements demanding the attention of its acquisition workforce, the Department of Defense (DoD) looked to the Department of the Interior (DOI) for outside acquisition support to help put a more cost-effective contract in place for the Military OneSource Program. DOI conducted a full and open competition, in close collaboration with DoD. Three offerors submitted proposals. The new contract includes a number of cost-saving measures, such as paying for call center operation services based on actual monthly call volume, rather than a single fixed price. The award is expected to save DoD $300 million over the five-year life of the contract and result in higher quality services to military personnel and their families.

?New contract,? you say? Then, what have we got other than expectations of savings? And how did you measure ?savings?? Savings of what from what? And were the new contracts entirely planned and awarded since the Obama memos, which were issued just last year?

We then get:

For many years, EPA?s Superfund program has relied on cost-reimbursement contracts to provide remediation cleanup services. By using its knowledge of historical costs paid under prior cost-reimbursement contracts, EPA successfully acquired these services on a fixed-price basis for remediation work at the Tower Chemical Superfund site. The conversion to a fixed-price contract and use of competition, both of which were achieved through extensive collaboration between senior agency program and acquisition managers, resulted in savings of $5.2 million, or a reduction of 65 percent from the original baseline estimate of what it would have cost to acquire these services on a cost-reimbursement basis.

Uhhh, some questions: What do you mean by ?successfully acquired?? Were the contracts in question planned, awarded, and performed since the president published his memos? Really? Have the contracts been completed? Has all the work under them been done and accepted? If so, what is the difference between the award prices and the final prices, including settlements of requests for equitable adjustments and claims? If the contracts have not been completed, how do you know how much if anything has been ?saved?? As you say, things have been the way they've been "for many years." And you're claiming that you created all this "change" in a few months through the issuance of a couple of memos? Really? You're saying that?

OMB?s overall conclusion?

The Obama Administration is changing the way Washington does business ? bringing a new sense of responsibility for taxpayer dollars by eliminating what doesn?t work, improving oversight, and cracking down on waste. In March 2009, the President directed agencies to save $40 billion in contracting annually by Fiscal Year (FY) 2011 and to reduce the use of high-risk contracts. The President?s mandate has instilled a new sense of fiscal responsibility in agencies and has slowed the costly and unsustainable contracting growth rate of the past decade. Agencies are ending ineffective contracts as well as contracts that support programs that are no longer needed, and they are increasing competition and reducing the use of high-risk contract practices that can lead to cost overruns.

Why the hurry to take credit? Answer: a four-year election cycle, a two-year campaign cycle, and the outgoing presidential appointee wants something good for his resume. Now, I?ll be the first to admit that the general public might be naive enough to take all this at face value, but I?m not. I?m not saying that the president?s program has not, will not, and cannot work, although I have my doubts. But the OMB memo strikes me as just the kind of ?success story? bull---- that I mentioned in my last blog post.

Actually, I might as well be blunt: I think the OMB memo is presidential appointee hogwash. But I?m willing to be convinced⎯by evidence.

Does the memo reflect the kind of thinking that they teach at Princeton and Harvard, where the OMB director and the president went to school? No. So why have the OMB director and the president sent this out? Is it because they think we're naive or stupid? Is it because they don't know better? I'm not sure which would be worst. I?m more than a little disappointed in the president for this, but he?s just a politician. What else could we expect?

Need more posts Vern. ~6yrs in contracting and these bring forth ideas that stimulate thinking. I could read this stuff all day. Do they have a job for that? Policy shop? I'm gonna go back and do the training exercise previously posted for new employees; I still feel like one everyday. Thanks Vern.

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