GOVERNMENT CONTRACTING INSIGHTS DEFENSE CONTRACTING

White House Reveals Better Contracting Initiative

1/8/2024
By Chanda Brown, Susan Cassidy and Robert Huffman

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Echoing the Obama administration’s Better Buying Initiative, and as a next phase in the federal government’s enterprise approach to procurement, the Biden administration announced the Better Contracting Initiative — a four-pronged initiative designed to ensure the federal government gets better, and more consistent, terms and prices when purchasing commercial goods and services, while enhancing support for small and disadvantaged businesses.

The fact sheet noted that the enterprise approach to purchasing common goods and services under the Obama administration resulted in better deals that has avoided $90 billion in costs for taxpayers since fiscal year 2016.

The first prong addresses how the Office of Management and Budget will leverage data across federal agencies to get lower prices and better terms. Under the initiative, OMB will launch a new, centralized data management strategy and tools to allow for greater sharing of price data and information on vendors and contracts across agencies within the federal government. This sharing of information will not only result in better value solutions but will also advance equity by allowing federal procurement officials to focus their searches on information that could support decisions to use a small business set-aside, according to the fact sheet accompanying the announcement.

One of the assumptions underlying the need for more information is OMB’s assertion that “contractors [are] operating at historically high margins,” the fact sheet said.

The initiative’s call for collecting and centrally managing commercial procurement data echoes the transactional data reporting approach adopted under the General Services Administration Multiple Award Schedules program. The administration presumably hopes that it will drive greater savings and more pricing consistency, consonant with the type of benefits that GSA reported after implementing transactional data reporting.

The second prong addresses how GSA will negotiate common enterprise-wide software licenses. “Prices routinely vary up to 20 percent for the same software across agencies,” the fact sheet said.

Under the initiative, GSA will negotiate government-wide information technology software license agreements with a large — but unnamed — software provider.

The fact sheet stated that these government-wide IT software licenses will reduce the price variance in software procurement, secure more favorable terms and conditions and save time across the federal government by obviating the need for each agency to plan, research and procure the same software solutions.

Beyond software, federal agencies will retain the ability to leverage best-in-class enterprise contracts for common goods and services, consistent with efforts that grow small business participation and supply chain diversity.

The third prong addresses how federal agencies will save money and avoid waste by getting contract requirements right the first time. Noting that each year federal agencies buy more than $110 billion in professional services, the administration announced that OMB will issue guidance directing federal agencies to use a proven methodology to pinpoint requirements for high-priority professional services acquisitions.

“Contracts often don’t clearly reflect the agencies’ needs, resulting in expensive modifications,” the fact sheet noted. To mitigate those costs, GSA will sponsor a series of facilitated requirements development and acquisition planning workshops for service contracts with acquisition teams across the federal government. GSA will also help train government procurement personnel to facilitate similar workshops at their own agencies.

The fourth and final prong addresses how federal agencies can receive better value from sole-source and other high-risk contracts. Select civilian agencies that have significant sole-source contracting or priority programs with underperforming contracts will engage with specialized teams of cost and engineering experts to participate in interagency peer reviews to bring down what OMB describes as inflated prices.

Agencies will also be able to leverage “hybrid” contracts for appropriate acquisitions. “Hybrid” contracts allow for multiple types of payment — cost-reimbursement, labor-hour, fixed-price — to better align with levels of risk during different parts of the lifecycle of a large acquisition for development and production.

The fact sheet cited efforts by the Defense Department to institute “peer reviews where independent procurement teams review terms to deliver a second opinion and leveraging special teams of cost and engineering experts like the Navy ‘Price Fighters’ to reduce the risk of inflated prices” as examples of strategies that have reduced costs.

Expert pricing advice offered during peer reviews helped the Defense Department realize cost avoidance of nearly $300 million with an investment of just less than $2 million in fiscal years 2020 through 2023, the fact sheet stated.

As a result of the Better Contracting Initiative, the Biden administration estimates that the federal government will generate more than $10 billion in annual savings and cost avoidance while improving the performance of federal procurement contracts. The fact sheet noted that last year, the federal government purchased $700 billion of goods and services.

As with many such initiatives, whether those expectations are realistic will depend upon the accuracy of the administration’s assumptions, details of the initiative’s implementation and the marketplace’s responses. ND

Chanda Brown is an associate, Susan Cassidy is a partner and Robert Huffman is a senior of counsel in the Washington, D.C., office of Covington & Burling LLP.


Topics: Defense Contracting

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