Fear and loathing
By Roseanne Gerin
October 30, 2006
Contractor groups expect more scrutiny if House goes blue
A proposed bill that would bring some unwelcome changes to contracting tops the list of issues that IT groups and government officials are tracking during the upcoming congressional elections.
The Clean Contracting Act, proposed by Rep. Henry Waxman (D-Calif.), ranking minority leader of the House Government Reform Committee, is intended to correct what he calls waste, mismanagement and fraud in federal government acquisition practices.
He introduced the 43-page bill in September as a way to prevent wasteful spending on some contracts awarded for Iraq’s reconstruction and relief and recovery efforts after Hurricane Katrina.
The bill would limit the use of what Waxman has called abuse-prone contracts. It would ban monopoly contracts, or those that do not specify a firm quantity of the property to be purchased, reduce the use of cost-plus contracts, and prohibit “layer cake” deals that inflate costs through tiers of subcontractors.
The bill also would limit noncompetitive contracts, increase oversight, prevent unjustified award fees, deter corruption in contracting and close a loophole that enables Alaska Native Corporations to receive no-bid work.
“If you just look at the legislation that’s being proposed, it includes a wide range of punitive, regressive measures,” said Stan Soloway, president of the Professional Services Council, the principal national trade association of the government professional and technical services industry. Such measures “basically send a message to the federal workforce, the contractor community and to everybody else that the process is fundamentally broken, that the government is getting ripped off right and left, and that’s it’s the Wild West.”
Some of the bill’s provisions have been resurrected from an amendment that Waxman proposed earlier this year and that subsequently was dropped.
Election day difference
If in the Nov. 7 elections, Democrats gain a majority in the House, accusations of waste, fraud and abuse in government contracting will intensify, Soloway said.
With a Democratic majority in the House, Waxman would replace Rep. Tom Davis (R.-Va.) as chairman of the House Government Reform Committee, which oversees government procurement issues and federal contracts.
The new bill is “a very telling road map of where we would be headed if [Waxman] became chairman,” said Trey Hodgkins, director for defense programs in the enterprise solutions division of IT industry trade association Information Technology Association of America.
“Every company doing business with the U.S. government ought to stand up and take notice of that bill, because it’s scary as hell,” said Larry Allen, executive vice president of the Coalition for Government Procurement. The nonprofit organization lobbies for the interests of its member companies that sell commercial services and products to the federal government, primarily through multiple-award schedule and governmentwide acquisition contracts.
The Coalition for Government Procurement also is tracking a requirement mandating that federal, state and local governments withhold 3 percent from their payments for goods and services. The Senate inserted the requirement in the Tax Reform Act to target contractors that have not met their federal tax obligations or paid other fines levied against them but that are not associated with their government work, Allen said.
“The idea of trying to reconcile all your various accounts with the government in an attempt to get back that 3 percent at the end of the year is going to cost you more that that 3 percent,” he said.
The Coalition for Government Procurement is one of 36 organizations that have formed the Government Withholding Relief Coalition to oppose the proposal. A couple of bills introduced late in the congressional session would repeal the tax, but the next Congress will vote on them, Allen said.
Whoever is chairman of the Government Reform Committee next year must review the Services Acquisition Reform Act panel’s final recommendations, a draft of which is expected in November.
The 2003 Service Acquisition Reform Act authorized the formation of a group to recommend federal procurement changes. Next year, the Government Reform Committee will hold hearings on the panel’s findings, Allen said.
If Waxman becomes committee chairman, look for the panel’s conclusions to be used as a “contractor whipping post,” he said.
The Government Reform Committee will examine closely the report’s recommendations to see which ones it will take further action on, Davis said during a speech at the Oct. 19 Government Electronic and Information Technology Association’s annual government IT forecast conference in Falls Church, Va. He would work with Waxman in reviewing the recommendations, he said.
“In an election year, you get caught up in all the political wrangling, but I think the conversation should be focused on acquiring the best results for the government at this point and a real focus on acquisition policy,” Davis said.
In on outsourcing
Contracting and IT groups also are keeping a close eye on outsourcing. Many Democrats in Congress support limitations, because they want more of government’s work done in-house, said Olga Grkavac, ITAA’s executive vice president, enterprise solutions division.
Outsourcing already faces strong opposition, but if the Democrats become the majority, “we might see even more effort in that area,” she said. Many anti-outsourcing provisions are tacked onto various bills throughout the year, she said.
Issues, such as health care IT, wireless emergency communications, job outsourcing and the energy market, will continue to drive political debates, no matter which party is in power, said Steven Perkins, sector vice president of legislative affairs and alliances at Northrop Grumman Information Technology.
Those issues are major areas of discussion for federal, state and local governments and could provide business for contractors, he said.
Wireless emergency communications is one area that could provide such opportunities. Northrop Grumman hopes to get more work similar to its win earlier this year of a $500 million contract from New York’s Information Technology and Telecommunications Department to build a broadband public-safety wireless network. The network will add high-speed data and video capabilities to New York’s mobile wireless communications network. It also will build several wireless applications to support first responders and transportation personnel.
The company also is tracking increased interest from state and local governments to outsource their IT and business processes. Virginia awarded Northrop Grumman IT a $2 billion contract to update and manage the state’s IT infrastructure. Now, the company is competing head to head with IBM Corp. for work in Texas for data center services, Perkins said.
The Texas Information Resources Department has not publicly disclosed the contract amount, according to Northrop Grumman, but an award could come in December.
Contractors will continue to track developments regarding competitiveness for IT companies and security issues involving U.S. borders, infrastructures and networks, said Gregory Poersch, vice president of government and commercial markets at the AeA. Formerly called the American Electronics Association, the group is a trade association that represents the technology industry.
And presidential directives for a health care IT system will remain high on industry’s watch list, Poersch said.
“Despite what happens in Congress,” he said, “all of those issues will be of major concerns to both parties as something that will have to be further addressed.”