Comment from email: Report to the President on Federal IT Modernization: comment

Comment on “Report to the President on Federal IT Modernization”

THIS OPINION IS MINE AND DOES NOT NECESSARILY REFLECT THAT OF HRSA OR HHS

A well-known reason why government moves so slowly is the cumbersome way it buys things. The government’s history of getting burned by bad contracts has created a risk-averse culture. Well-intended people placed speed bumps in the acquisition process for accountability. Labor contracts are unpredictable as they involve people. The stakes are high if the wrong team is chosen; remedies are expensive, time-consuming, and disruptive.

However, the risks are much lower when purchasing commercial-off-the-shelf (COTS) software. With COTS the manufacturer (not the government) shoulders all the risk. Vendors have already borne the cost and risk of designing, developing, and testing the product and bringing it to market. COTS products like Adobe, Excel, SPSS, Oracle, or ESRI are vetted extensively by millions of users around the world. Many vendors offer free trial licenses so agencies can test out the product before investing. And if it doesn’t meet the needs or becomes obsolete, the government can cut its losses by simply opting to not renew maintenance.

Unfortunately, the Federal Acquisition Regulations (FAR) and agency acquisition rules don’t acknowledge the low risk nature of COTS software and require a full-blown competitive acquisition process with all the speed bumps of labor contracts. Even the so-called “expedited” purchase vehicles such as GSA schedules require too much documentation and are not much faster. The amount of oversight should always be commensurate with risk. Unfortunately, COTS purchases are way off balance and the FAR perpetuates this problem.

An example of unnecessary obstacles are multiple FAR clauses that discourage purchasing directly from the actual manufacturers and force agencies to buy from re-sellers. These middle-men typically add a 2% to 5% fee that results in higher costs for the taxpayer.

Also, each time the government pays maintenance on a product it already owns, it must also compete the long-term maintenance contracts. Besides the unnecessary paperwork burden this requirement adds, agencies often could end up with a different re-seller each year. The vendor who helped you install the software might not be the same vendor who answers technical questions next year. There is no continuity of support, which is frustrating and time-consuming for complex software that underpin critical business applications. Logistically, it is much easier for customers to deal directly with the manufacturer, rather than a middle-man who changes each year.

In the private sector if you need software you just go to the vendor’s website, order the product with a credit card, and download the software. The user can get to work within minutes.

In the government, the FAR requires a process like this:

1) Write up multiple documents including a 19-page cryptic acquisition plan, an independent government cost estimate, and other paper-based templates.

2) Obtain between 5-10 signatures

3) Announce an RFP on GSA’s website with detailed instructions for how bidders (e.g. re-sellers) must write and submit their proposals with all sorts of legal language attached.

4) Wait 2 weeks for proposals to come in

5) Review the proposals

6) Write more documentation showing why the “lowest cost technically acceptable” vendor was chosen.

7) Wait for a very overworked Contract Officer to write and sign an award document.

8) Hope the correct final version of all documents get delivered to the correct people, as all of this process is handled by email attachments.

9) Then, the user can finally download the software.

10) Finally, the vendor faxes or emails an invoice for the agency to pay manually.

All in all, this process typically takes 3 to 4 months. This overly burdensome process not only delays delivery of services to citizens, it also wastes taxpayer money. In addition to the re-seller fee, there is the cost of government labor needed to follow the 9 steps. For instance, my team recently purchased a $16,000 software product needed to help manage data on a website. The re-seller fees totaled $800 (5%). It cost 10 hours of my time and 25 hours of someone’s time in the contract office to process all the paperwork. When you add up the cost of these 35 hours ($2,275) plus the small business re-seller fees the “actual” cost to the government rises to $19,075, or 19% higher than the open-market price. Why are we strangling ourselves with red tape for the privilege of paying 19% more? If you multiply the waste by the thousands of software purchases made by all the Federal Departments each year, the government is easily wasting $1 billion or more.

The current software acquisition process is the epitome of waste and inefficiency and needs to be reformed. For low-risk purchases such as off-the-shelf software, we should throw this entire process out. I recommend the American Technology Council bring in Six-Sigma Black Belt Business Process Re-engineering experts to develop a simple, standardized, streamlined acquisition process for software, and then re-write the FAR to reflect the new process. Or better yet, raise the Purchase Card maximum from $3,500 to $500,000 for software purchases only. The ATC should also provide training to all Chief Acquisition Officers and Contract Officers in the new streamlined process and require all agencies to start using it.

-Seth

Seth Marcus, FAC-P/PM 3
Director, Division of Data and Information Services
HRSA, Office of Information Technology (OIT)