Defense Secretary Gates Calls for Procurement Reform…and He Puts Competitive Bidding at the Forefront of the Pentagon’s New Priorities

Posted on September 15, 2010

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The following excerpt has been reprinted electronically with permission from the the Reverse Auction Research Center Blog. Use the following link to access the post in its entirety: Procurement Reform.

Big news out of the Pentagon has Robert Gates, The Secretary of Defense, has issued a new report calling for big changes – fundamental changes – in the way the military does business (and it is big, big business – over $400 billion annually!). Secretary Gates and Ashton Carter – who is the Undersecretary of Defense for Acquisition, Technology and Logistics – have just issued a 23-point memorandum, outlining a plan for reforming the DoD (Department of Defense) and its acquisition processes.

According to reports, here are five principles that will drive the DoD’s procurement reform.

Once again use the following LINK to access the Reverse Auction Research Center Blog for additional details.


My Commentary:

What is interesting about this most recent announcement regarding procurement reform is that military spending has been a longstanding concern on both sides of the 49th parallel.

Regarding the U.S. I can recall writing a story back in August 2007 titled “DoD procurement practice then and now: A public versus private sector comparison (Part 1)” which focused on a 1999 report that analyzed the differences between private and public sector commodity buying practices as it related to DoD procurement.

With the benefit of hindsight the piece still holds its relevance today, especially since it talks about the challenges faced by the report’s authors in gaining good intelligence from a reluctant military community in terms of overcoming both operational as well as political concerns. The latter of course was tied directly to an “expectation that their findings would portray DoD personnel in an unfavorable light,” a fear which according to the authors was actually fueled by the “leadership within the DoD itself.”

In Canada, the fact that a detailed spend analysis spanning a 7 year period indicated that the Department of National Defence generally paid a 157% premium over going market prices for Indirect Material goods, was also a source of similar concern.

It is a safe bet that coupled with the sound bite anecdotal stories by an all too eager press with an appetite to sometimes fan the scandal and controversy flame, does little to assuage said fears. Nor do I imagine that today’s world relative to access in a practical sense would be much different than it was in 2007.

This being said inefficiencies in public sector procurement relating to the contracting process is not confined to the DoD. Issues regarding inefficiencies across the board have even prompted calls for privatizing the entire government’s procurement practice, as illustrated in a 1995 article by Dr. Ronald D. Utt, Ph.D.

In my October 26th, 2007 post “Can present day PWGSC woes be traced back to a 1995 article on the General Services Administration in the U.S.?” I discussed at length Dr. Utt’s suggestion that the General Services Administration “GSA” should be privatized through an employee buyout – an interesting thought to be certain.

Citing the principle behind the GSA’s creation in 1949 whereby the centralization of the buying mechanism could achieve significant savings through “specialization and economies of scale,” Utt maintained that “any cost advantages from the government’s vast buying power was more thD. Utt, an offset by bureaucratic inefficiencies and rigidities.

The good Doctor then went on to say “that the resulting problems are a characteristic of “any government monopoly,” that attempts to do “what is often done better and cheaper by leaner more flexible” organizations. If taken on face value, this appears to be a reasonable and prudent evolution in his thought process.”

However, and while the abandon versus repair proposition from Utt is interesting and perhaps even thought-provoking, it is one that is seriously flawed in that “government is not a corporation and therefore has different priorities and imperatives to meet when procuring goods and services.”

I am of course talking about the general acknowledgment that public sector procurement also takes into account socio-economic implications including the importance of developing key business sectors or industries. In Canada, examples of a key sector or industry might include the SME/minority-owned business community, or Canadian-based manufacturing sectors such as shipbuilding where job creation and local community financial stability are additional factors that need to be taken into consideration.

The point here is that while reform is necessary, it cannot be achieved through a myopic strategy that fails to take into account the unique realities associated with government procurement objectives that include both internal as well as external mutual interests.

As reported in my July 26th, 2010 post “Procurement ombudsman says Federal buying policy unwittingly helping to create monopolies,” the announcement by the procurement ombudsman Shahid Minto, that the Fed’s policies back in 2005 had “unwittingly” helped to create monopolies gives testimony to the truth of this statement.

In short, move towards implementing reforms that take into account the true diversity and complexity of government purchasing.

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