Friday, March 06, 2009

Obama on Government Contracting

Reforming How Government Does Business

“I don't know what the hell this ‘logistics’ is that
Marshall is always talking about, but I want some of it.”
Fleet Admiral Ernest King
Commander of U.S. Pacific Forces


Mentioning acquisition, contracting, or logistics to a group of military officers used to produce glazed eyes, yawns, and an almost visible shut-down of brain functions – the same reaction observable every day in lecture halls across the country where a droning graduate seminar instructor follows on the heels of a heavy mid-day meal.

Nonetheless, last Wednesday (March 4th ) President Barack Obama gathered (albeit before lunch) a large and diverse assemblage of Members of Congress, government contracting officers, and large and small business owners to launch yet again a Pentagon pipe dream: reforming the acquisition and contracting system used by the federal government in general and the Pentagon in particular.

With the national and international economic systems upside down, many outside the administration regard the push for acquisition reform as ill timed. The President, conversely, believes there is no time like the present to initiate reforms. His logic is impeccable: none of his predecessors, no matter how favorable the state of national and international finance and trade during their time in office, seriously attempted acquisition reform. And with no other president since FDR having to endure anything approaching the current state of international and national economic disarray , this would seem the optimum time to go for reform because the rules are so fluid that real reform can spur recovery. It is a calculated gamble by the president who believes that he will reap returns in the tens of billions of dollars that can then be devoted to other immediate priorities.

Two extracts from the president’s remarks laid the problem out for those in the room.

“Over the last eight years, government spending on contracts has doubled to over half a trillion dollars. Far too often, the spending is plagued by massive cost overruns, outright fraud, and the absence of oversight and accountability. In some cases, contracts are awarded without competition. In others, contractors actually oversee other contractors. We are spending money on things that we don't need, and we're paying more than we need to pay. And that's completely unacceptable….

"Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat: That's $295 billion in wasteful spending. And this wasteful spending has many sources. It comes from investments [in] and (sic) unproven technologies. It comes from a lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars.”

The president then cited the hundreds of projects in Iraq that were never completed and the “profit skimming” by Iraqis and even by a few Americans. He also mentioned the “no performance – no penalty” attitude that has come to prevail for large acquisition programs that go over budget and are not delivered within the contract timelines.

In the late 1970s I had the good fortune to work directly for 30 months for the Army’s most senior general responsible for acquiring weapons and supporting military materiel. It was tantamount to a small-seminar tutorial by one of the world’s experts on military contracting and acquisition ills. Among other lessons I took away from that experience was the need to avoid the specialized language of those who negotiate contracts – both government and business representatives – if one is talking to non-specialists.

Obama’s entire statement conveys his understanding of this fundamental rule of leadership. Where others talked the game, he is walking the walk -- and is not inviting but requiring those who have responsibility for the public purse to walk with him:

“It’s time for this waste and inefficiency to end. It’s time
for a government that only invests in what works. And
what’s encouraging is, is that there is broad bipartisan
consensus on behalf of reform, and we are committed to
taking swift action that changes our system of contracting
to save taxpayers' money.”

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