THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, October 23, 1995 TAG: 9510210192
SECTION: BUSINESS WEEKLY PAGE: 05 EDITION: FINAL
SOURCE: BY PAT TOWEL, CONGRESSIONAL QUARTERLY
LENGTH: Long : 134 lines
Editor's note: Scores of Tidewater companies service the military bases and ships in Hampton Roads. These service contractors are now grappling with an ambitious overhaul of the federal procurement system. This article, which appeared in the news publication Congressional Quarterly on Oct. 9, provides an overview of defense acquisition reform.
Only a year after Congress enacted highly touted legislation to streamline federal purchasing, House Republicans are pressing for far-reaching additional changes which, they contend, would further accelerate federal purchases and reduce their cost.
House conferees on the annual defense authorization bill (HR 1530) want to fold into that measure the provisions of HR 1670, an acquisition policy bill that the House passed Sept. 14 over the strong opposition of many small business advocates.
The procurement bill's most contentious provision would substantially alter the current statutory requirement that most federal contracts be awarded on the basis of ``full and open competition.''
That standard underpins many rules of the current federal purchasing process, which is geared to ensure that any potential bidder has the opportunity to go after a contract. But critics contend that the ``full and open'' standard has fostered a complicated and rigid procurement process that costs the government more in time and money than it saves.
HR 1670 would, in effect, redefine the ``full and open'' standard to afford federal purchasing officials much more latitude to simplify the contract award process by winnowing out early on firms that have no realistic chance of winning.
We are trying to make the government a little more like business,'' Government Reform and Oversight Committee Chairman William F. Clinger, R-Pa., told the House Sept. 13, as it debated the proposed legislation. ``To do that, we have to provide a measure. . . of discretion to the people who are out there on the line, doing the purchasing.
But many small-business advocates contend that the proposed change would merely encourage bureaucrats to pitch contracting opportunities to a small clique of established firms, rather than according a fair hearing to new bidders. It is axiomatic within the small-business advocacy community that the ``full and open'' standard, established by the Competition in Contracting Act of 1984 (CICA), as been instrumental in boosting small business' share of the federal contracting pie over the past decade.
``Full and open competition actually keeps bureaucrats from using prejudice and an old-boy network to exclude worthy businesses,'' countered Cardiss Collins, D-Ill., the senior Democrat on Clinger's panel. Besides denying new firms their right to bid for federal business, Collins contended, a more restrictive contracting process would deny the government both the savings that result from the the pressure of additional competitors and the innovative products that are more likely to come from hungry new companies.
Since the Defense Department accounts for about 80 percent of the $200 billion the government spends each year for purchases, many of the Pentagon's allies in the House have embraced the drive to simplify the buying system in hopes of squeezing more buying power out of the armed services' shrinking weapons budgets.
The National Security Committee, chaired by Floyd D. Spence, R-S.C., closely collaborated with Clinger's committee to hammer out HR 1670. From the beginning, their aim has been to secure House approval of procurement reforms that could be woven into the defense authorization measure.
But, like many other bold House GOP initiatives, HR 1670 faces an uncertain future at the hands of the Republican-led Senate.
Critics of many political hues have long blasted the government's purchasing process as a mare's nest of uncoordinated requirements that costs more and takes longer than typical commercial practices.
Some of the additional hoops a contractor must jump through to sell to Uncle Sam are intended to protect the government against price-gouging. With some items, such as jet fighters or nuclear submarines, a given contractor is the only seller and the government is the only buyer.
Since the government cannot assume that competitive market forces will produce a fair price for such items, it relies instead on elaborate ``cost-based'' contracting procedures, which are intended to ensure that the company's profits are reasonable in relation to its costs of production.
Critics have long complained that cautious bureaucrats routinely have applied cost-based rules to the purchase of commercially-sold items, for which market competition is strong enough to protect the government's interest.
Other rules are designed to use the government's purchasing power as a lever to advance other public policy goals, such as providing more opportunity for firms owned by minorities and women.
However minor the impact of any one of these requirements, their cumulative effect in terms of cost and time is substantial. A variety of studies conclude that the government pays about 20 percent more than a commercial customer for comparable purchases.
Streamlining the acquisition process was one element of President Clinton's campaign to reinvent government. And it is a high priority of Defense Secretary William J. Perry. In part, Perry based his position on the argument that the Pentagon needs the promised savings to shore up the steadily declining weapons procurement budget.
Perry has warned that the existing rules have deterred some high-tech companies from bidding for Pentagon contracts, denying the services access to cutting-edge developments in computers, communications and other areas.
Among other changes brought about by the 1994 legislation was an expansion of the number of commercial purchases that would be exempt from ``cost-based'' accounting rules.
The new GOP House leadership this year decided to push the system even further toward the wide discretion enjoyed by commercial purchasers.
The resulting bill would not change the tightly regulated, cost-based process by which the Pentagon contracts for big-ticket weapons. Nor would HR 1670 impinge on other politically explosive aspects of the current system. For instance the bill would not change the process by which some contracts are steered to small businesses or to companies owned by women and minorities. Now would it amend the numerous buy American provisions designed to give domestic manufacturers a leg up on foreign competitors.
On June 14, Clinger and Spence jointly offered an early version of their bill as an amendment to the defense authorization bill. That proposal would have replaced the requirement for ``full and open competition'' with one for ``maximum practicable'' competition. Intent on preserving a statutory right for any company to bid, small-business lobbyists campaigned vigorously against the amendment. By a vote of 213-207, the House approved an amendment by Collins that gutted that provision of the Clinger-Spence proposal.
Subsequently, the rest of HR 1670 was massaged. The version adopted by the House Sept. 14 would keep the ``full and open competition'' standard, thus guaranteeing any company a right to bid for a contract.
But it would also give federal purchasers more leeway to eliminate bidders if, for instance, they were deemed clearly not in the running. Any company eliminated from formal consideration could appeal such a decision.
On Sept. 13, Collins offered as an amendment to HR 1670 the same amendment that the House had adopted in June. But some business groups which had backed her in June took no position on the revised legislation. Moreover, the bill was supported by the National Taxpayers Union and by Speaker Newt Gingrich, R-Ga.
Of the members who had supported Collins in June, 22 Republicans and 10 Democrats opposed her amendment this time. Only four members switched in the other direction. Collins' amendment was rejected, 182-239, and the next day the bill passed, 423-0. by CNB