Procurement is America's Big Problem

Much of our political debate involves how our tax dollars are spent. Look at the roots of the Tea Party, and you’ll see that their anger stems from the TARP and Recovery packages from the Bush and Obama administrations respectively. Ask a progressive about government waste, and they’ll likely use oreo cookies to point to the trillion dollars spent on war over the past few years. Forever we go chasing donkeys and elephants around the carousel of blame talking about who wastes more of our money, the social programs of the left, or the military programs of the right.

The unsexy answer to this debate is that how government spends our money is just as important as what it spends it on. “Federal Procurement” is the process by which the federal government buys things. It’s governed in the 2,000+ page Federal Acquisition Regulation and the similarly sized Defense Acquisitions Regulations System. These tomes sit at the very root of all of the major issues we face today.

Both the liberal and the conservative ought to jointly care about federal procurement. From “gov2.0” to financial reform to healthcare to defense, there isn’t a single political issue that the federal procurement process does not impact. If you’re a healthcare advocate, for example, how government buys things will greatly affect any form of universal healthcare’s cost. If you’re pro-security, I’m sure you want government to have the best flak vests and armor available. You want procurement to work.

The Federal Acquisition Regulation is meant to optimize the dollars spent by the federal government. It’s designed to get government the best price for what it purchases, and it’s designed to make sure that those dollars get spent in a way that creates meaningful social impact. It fails at both, and in some cases– succeeds more at doing the opposite. It keeps small businesses under the thumbs of big ones, and creates so much overhead that government gets outrageous prices.

This foundational regulation that affects all of government is completely and totally broken. One need only look at CIO-Of-The-Federal-Government Vivek Kundra’s desk for the evidence. Last time I was in there, he had a 17” all in one Gateway computer sitting on it because regulations prohibit him from buying a reasonable machine. He’s the CIO!

Take, for instance, section 8(a) of the regulation. It’s the regulation that allows socially and economically disadvantaged businesses get a leg-up on the competition by allowing them, sometimes, to get around the open bidding process. Agencies are also encouraged to set aside a substantial portion of their budgets to go to 8(a) designated firms. For one year, the GAO found $325 Million went to ineligible firms and if you look at their methodology (pages 40-45), you’ll find that they’re barely scratching the surface. Not to mention, getting an 8a certification can cost a minority-owned, economically disadvantaged business tens of thousands of dollars in staff time to go through the mountains of paperwork to, in essence “prove” that they’re minority owned and economically disadvantaged. How on earth can any actually socially disadvantaged business afford 8(a) certification?

The General Services Administration has things called “schedules” which are pre-negotiated contract listings. It’s a hunting license: once on the schedule, you’re free to go grab federal business. Often the schedules require a business to be in business for 2 years before you can even apply to be on the schedule. It’s because the government wants you to be a proven, solid business before you can start doing business with the government. Forget for a moment that the age of a company has little to do with its ability to succeed in the marketplace (see: General Motors), the regulation all but forces innovative startups to be earners for the Lockheed Martins of the world, rather than nimble self-starters.

There’s a gigantic gap between what government pays for the web, and what everybody else does. To get up and running with a week’s notice, then-Senator Barack Obama engaged with the company I founded– Blue State Digital– for a total cost of 36,171.50. The first quarter got his award-winning, much ballyhooed campaign website launched and out the door in 7 days, streamed his campaign announcement live on the internet, and saw the launch of Now, no doubt Obama paid a lot more than that to Blue State over the course of the campaign (and they’ve probably raised their prices as a result of his victory), but there’s just no way it comes close to the 9.5 Million in 6 months it took to redesign, or the incredible amount of money government has spent on content management alone. Ask a contractor where the cost comes from and they’ll tell you a lot of it comes from the federal procurement process itself.

The cynical fringe will say this is a symptom of government’s brokenness, and that the only thing we can do is drown it in a bathtub. That’s an ideological soundbite, not a solution. And I don’t know what the solution is either. But the current system has got to change. It creates an unbelievable amount of waste, it is ripe with fraud, and in the IT space in particular it keeps government locked in enterprise ice ages, rather than coming around to smart, cheap software that gets the job done.

Today’s election day, and I haven’t heard many candidates talk about procurement. They want to repeal obamacare or lock all the republicans up on an island or some other such nonsense they say to keep you charged up. There’s no emails going out about procurement, and it’s unlikely that anybody’s ever won an election based on their stance on procurement. But it doesn’t change the fact that how government spends its money is just as important to good government as what it spends its money on. The how is far more broken than the what. We could probably afford the War in Iraq, the Bailouts, and Universal Healthcare for every man woman and child, and a tax refund if we managed to fix procurement.

Since I don’t have a solution, I’d like to start trying to find one by creating a dialog. If you’re a CIO or Procurement official who’d like to discuss what things like from your side of the fence, I’d like to interview you. Same with you, government contractors, small, big, and anywhere in between. If we’re going to get some real change, this stuff has to happen. So please, contact me.

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