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Group Cautions on Acquisition Reform |
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(Source : Project On Government Oversight; issued March 7, 2002)
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 Written Testimony of Danielle Brian
Executive Director
Project On Government Oversight
before the
House Government Reform Subcommittee on Technology and Procurement
Policy
Legislative Hearing on H.R. 3832,
The Services Acquisition Reform Act of 2002 (SARA)
March 7, 2002
The Project On Government Oversight (POGO) investigates, exposes, and
seeks to remedy systemic abuses of power, mismanagement, and
subservience by the federal government to powerful special interests.
Usually, as we consider which public policy issues we will pursue, we
return to this mission statement to ensure that it would fall in one of
those three categories. In the case of Acquisition Reform it is easy. It
falls into all three.
George Orwell would be proud of the Acquisition Reform community. It
has created such Orwellian concepts for the acquisition of goods as
competitive" one-bid contracting; "commercial items" that are only
bought by the government; information about cost and pricing that "need
not be current, accurate, and complete;" and "indefinite delivery,
indefinite quantity" contracts. Only those who have sipped from the
acquisition reform well could believe that these "reforms" benefit the
taxpayer.
At the Subcommittee's last hearing, one of Acquisition Reform's most
vigorous cheerleaders, Stan Soloway testified that POGO's 1998 report
contained "errors" and "misconceptions as to what's going on" but
declined to articulate what those were. He asked to be allowed to submit
a challenge to our findings for the record. We're still waiting. In the
meantime, I am introducing for the record our newest report on the
damage caused by Acquisition Reform.
We have found that, in fact, Acquisition Reform has been extremely
detrimental to oversight and accountability of federal procurement.
Examples include:
One-bid contracts that have been labeled "competitive" have clearly
proven wasteful: a May 2001 DoD IG audit of 145 sole-source and
"competitive" one-bid contracts discovered that overpricing had occurred
in more than 1/3 of the contracts, totaling $23.1 million. In the vast
majority of the remaining cases, the DoD IG was unable to determine
whether overpricing had occurred, due to inadequate data.
The term "commercial" has been weakened so much that it is practically
useless. For instance, C-130J military transport aircraft have been
offered for commercial sale in the past, and while not a single sale was
ever made to civilians, oversight was loosened. Similar attempts are
being made to classify the C-17 cargo plane. By thus categorizing the
airlifter, the Air Force would be allowed to bypass important pricing
oversight which is only intended to be lifted for items which are truly
commercial and whose prices are set by free market forces. A $232
million outsize cargo carrier with 173,300 lbs. capacity is clearly not
a mass-market item which is sufficiently affected by the free market.
Although using Indefinite Delivery Indefinite Quantity multiple award
contracts frequently reduces the length of the acquisition process by as
much as 90 percent, they actually stifle competition. A 2001 DoD IG
audit reported that, "The underlying goal of multiple award contracting
was to obtain the best value while sustaining competition throughout the
contract period. . . . However, the large percentage of sole-source
orders demonstrates that most DoD contracting organizations continued to
be increasing the risk to the Government and losing the benefits of
price competition."
A GAO study of micropurchase credit cards revealed that purchase cards
have been used for "fraudulent [personal business] transactions for
pizza, jewelry, phone calls, tires, and flowers." Perhaps the most
telling example is that of one cardholder indicted for making over
$17,000 in fraudulent personal transactions who "commented that illegal
use of the card was 'too easy' and that she was the sole authorizer of
the card purchases." A recent DoD IG audit found that overcharging
occurred on no fewer than 42% of the audit sample. Not surprisingly, the
DoD IG recommended "replacing [i.e. eliminating] the electronic commerce
interface" or, at the very least, "improv[ing] management controls on
micro-purchases."
We are not alone in our concern. As is included in our report, the GAO
and DOD IG have repeatedly warned that Acquisition Reform efforts have
worked counter to the interests of the taxpayers. In fact, the IG, using
atypically colorful language concluded that Acquisition Reform-endorsed
multiple award contracts have resulted in an "anemic level of
competition."
We are now here to witness the beginning of the infection of services
contracting with the Services Acquisition Reform Act (SARA).
The first provision of SARA that alarms us is Section 221, the
increased threshold for "micropurchases" from $2,500 to $25,000. Perhaps
some of the Members of this Subcommittee are unaware of Representative
Horn's fine work in the Government Efficiency Subcommittee of this very
same Government Reform Committee. He held hearings last year entitled,
"The Use and Abuse of Government Purchase Cards: Is Anyone Watching" It
would appear from Section 221 that this Subcommittee is not. Senator
Charles Grassley, who had initiated the investigation of the federal
purchase card program testified that, "The GAO reports that purchase
cards are being used to buy expensive items for personal use " with no
accountable records. There were over 500 known purchase card fraud cases
in the last two years alone. And with just a small sample, GAO found
some more. And the worst part about it, Mr. Chairman, no one seems to
care. The Defense Finance and Accounting Service simply pays the bills
in full "no questions asked." At this hearing, Representative Horn
concluded that, "the cost of this program may far outweigh its
benefits." Why on earth then, would this Subcommittee expand ten-fold a
program that has already been found to be so replete with abuse?
Section 301, Revisions to Share-in-Savings (SIS) Initiatives, greatly
expands SIS contracts to be used government-wide without a SHRED of
evidence that they can be successfully used beyond energy-savings. As we
testified last November, projected contractor profits from this program
are far more concrete than projected savings. Of particular concern will
be how benchmarks will be established to prove that savings have in fact
been realized. It is certainly premature and irresponsible to expand
this initiative before there has even be an evaluation of the Department
of Education's pilot SIS program.
In circular logic, Section 401 of SARA encourages the use of
performance-based contracting, yet in the very next section, Section
402, this bill encourages the use of what is essentially the polar
opposite : Time and Material and Labor Hour contracting. These types of
contracts pay for time or money spent, not for milestones reached or
work completed. Anyone who has hired a lawyer knows what happens when
you pay by the hour -- the customer, in this case the taxpayer, will pay
more for less. The government should not be encouraging the use of a
class of contracts with as clear a disincentive to produce as are
provided in Section 402.
We are also very concerned about Section 404 -- the designation of
"Commercial Business Entities." Again Orwell would give a thumbs-up to
the concept of pretending that the free-market had set the prices of
goods and services when, in fact, they had not. Why should the
government waive the Truth In Negotiations Act or Cost Accounting
Standards when it buys Sikorsky Black Hawk military helicopters from
United Technologies, simply because it also sells Otis elevators?
Overall, Acquisition Reform has been destructive to accountable,
responsible federal acquisition practices. The acquisition reform
community has slowing chipped away the safeguards that protect the
public fisc by hiding behind the rhetoric of "cutting red-tape." This
SARA legislation is a continuation of these damaging "reforms" and would
appear to be evidence that political contributions are swaying the
direction of public policy.
-ends-
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