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By Steve Kelman

Blog archive

Procurement contests pooh-poohed by an unlikely source

In a contracting world in which the climate for innovation has been terrible for a decade, one bright spot on a dim horizon has been a surge in the use of contests as a procurement tool.

The basic idea of a procurement contest — sometimes called a prize or challenge — is to set out a performance requirement for a capability that needs development work and offer a prize, usually money, for the first or best entity to produce a product or capability meeting the requirement.

Contests engender a lot of effort, and you pay only for results. Keep in mind the caveat: if it is a risky undertaking that may well fail, you need to be willing to pay more than you would have for a level-of-effort traditional procurement. The push for greater use of contests as a procurement technique has gotten the official blessing of the Office of Management and Budget, which has doubtless helped things along. Interest in contests has grown in the private sector as well, with an entire company, Innocentive.com, acting as a platform through which private firms can advertise contest opportunities. NASA and some other government agencies have been using Innocentive as well.
Well, I recently read something that threw cold water on the idea. Before I tell you the unlikely source of this icy blast, here is a sample:

Federal agencies…are increasingly tapping a parallel universe of what are known as "prizes and challenges" to bypass the [Federal Acquisition Regulation] and agency procurement processes and bring innovation to government.… [Agencies] have demonstrated some creative interpretations of existing statutory authorities to sponsor and award prizes for a wide range of requirements, in ways that push against the boundaries of the federal procurement system.… This approach is able to lead to rapid selections because it frees the agencies and the competitors from the complexities and costs of complying with the FAR rules, which are in place to protect taxpayers, even though the process employed is really a federal procurement. Applying innovative techniques to achieving federal missions should be supported.… But their use should be carefully monitored and tracked to ensure that agencies are also following core procurement procedures to properly obtain necessary goods and services.

So who said this? An inspector general somewhere? Notice that "creative" appears to have a negative connotation, and the speed of the process seems to be seen as a problem.

No, unfortunately the source of this quote is not a by-the-book IG or another kind of auditor. This passage comes from a column in the Washington Business Journal by Alan Chvotkin of the Professional Services Council, the main trade association representing high-end IT/consulting/professional services contractors.

I know and like Alan, and I also know he has always — at least since the 1980s — been somewhat conservative in procurement matters. But I really think this column was very unfortunate. The safest course for government contracting officials is to keep their heads down and not try anything new. The last thing contracting folks need to hear is naysaying about innovation from industry, which normally prides itself on encouraging the government to look for more sensible — may I say more business-like — ways to do business.

It is particularly unfortunate that the only example of a bad contest the column cites is a contest being sponsored by the Veterans Affairs Department to develop an Internet application that will encourage vets to use something called Blue Button, which allows their service-related medical records to be downloaded by nonmilitary healthcare providers. Blue Button is an effort led by Peter Levin, VA's smart and innovative chief technology officer, who brings a long background in the high-tech private sector to public service, and the early impression of the Blue Button effort is that it is a success story, developed under the leadership of exactly the kind of person often difficult to attract to federal service at a senior level.

The Professional Services Council should continue to encourage interesting procurement innovation in government, not dump on it.

Posted on Aug 10, 2011 at 10:15 AM

Reader comments

Sat, Sep 3, 2011 LF Arlington, VA

As someone new and still getting to understand procurement in government, I found Chvotkin's article as a word of caution. As he states, he provides pros (time-savings, past performance is out the window -- do the work now and you will be rewarded) and cons (results may not achieve desired outcomes), but more importantly, he brings up two very good points that should be taken into consideration. 1) FAR (for all its good or bad features) is there to protect taxpayers; bypassing by abusing, ABUSING a innovative means of procurement in the name of expedience puts that protection at risk. 2) Use of contests should be carefully monitored and tracked, though I disagree that should be done to ensure proper procurement rules are followed. Contests should be carefully monitored to prevent collusion, corrupting what FAR is partially in place to prevent -- a corrupt procurement system in government. In government, these contests (while not new) may become more frequently used, but the unintended consequences must be considered if used widely. To (cautiously) draw a parallel, think of the "bad loans" that got the financial market in the current mess. These loans were not new vehicles, but the use of them significantly increased. Taking on that level of risk occasionally is one thing, but unmonitored, unchecked, and unmitigated had economy-crippling effects. While the unintended effects of wide use of contests may not shake the core of the US economy, it may have consequences in areas such as competition/fair trade, safety and spending (what if these aren't the most cost-effective means for procuring said product). So, tell me, what's wrong with raising a yellow flag and asking for a little quality assurance in procurement to protect all parties involved, including taxpayers, and instill faith that procurements via contests are on the level?

Fri, Sep 2, 2011 KRL

I have nothing against innovation; it is just that the basics of procurement are the basics for a reason. In my 27 years (including a CPCM) we have come full circle so many times from the concept of "innovation" back to the basics in the FAR that I sometimes get dizzy. Is today an innovation day or a back-to-basics day?? The basics are simple - 1) hire people who know what they are doing and provide continuous training, 2) hire outstanding young people then have the grey hairs train and mentor them well, 3) emphasis well thought-out and planned projects, 4) encourage well executed projects, 5) get the politicians out of federal procurement!!!!! (politicians have no clue how the system works much less what is in the FAR, and, their constant playing with funding of programs is the primary cause of wasted dollars as they abuse the system; they should all be brought up on fraud charges). In regards to FAR 12, that was a great innovation. However, all the transparancy and ARRA reporting rules have basicaaly gutted the intent of FAR 12. My organizatoin is already seeing suppliers thinking about getting out of the government supply business. Looks like we will be going back to pre-FAR 12 days.

Thu, Aug 18, 2011 Steve Kelman

I would like respectfully to disagree with Vern Edwards. Actually, the use of contests in general in government goes back to the British government's sponsorship of a contest in the 18th century to solve the very thorny scientific problem of calculating longitude. (See the book LONGITUDE by David Sobel.) The various DARPA challenges of the past few years have been widely praised. Contests are of course not a once-size-fits-all solution, but we do need to encourage contracting people to think about creative ways to get better value from contracting. Such "cheerleading" should best be interpreted as an effort to publicize and encoruage promising new ideas, to try to have a counterweight against the many forces in the system that discourage contracting people from departing from old practices.

Thu, Aug 18, 2011 Vern Edwards

Steve's criticism of Alan's column is unjust, and to characterize Alan's piece as an "icy blast" against innovation is absurd. Steve loves gimmicks -- holdover thinking from his days as principal cheerleader for doing something, anything, new. Anything new is good. He never thinks about implications and potential consequences. His thinking stops with newness. The end justifies the means. Solid professional work and following the rules is stodgy. Alan's piece is a reasonable word of caution about a technique that could, if used unwisely and too much, become an abuse and a scandal for the Obama administration. As someone who has urged innovation in source selection, and whom Steve once praised for such an innovation, I know an attack on innovation when I see one. I also know Alan, and I value his knowledge, experience, and wisdom in matters pertaining to acquisition. I find the force of Steve's reaction to Alan's piece to be inexplicable and confirmation of what veteran colleagues have long been telling me -- that when it comes to government contracting, his thinking is about an inch deep.

Thu, Aug 11, 2011 SP Mayor Summit Point, WV

Hmmmm ... two professionals I respect offering encouragement and caution at the same time.I would like to suggest what the taxpayers deserves is the assurance that whoever wants to compete in the contest [and in my view RFQs, RFPs and even IFBs all constitute contests where winners and losers are declared]has an 'equitable' chance to do so. Some of these contests & challenges seem to be a modified version of competing for awards under a broad agency announcement.I say assure equity and innovate like made - cause we need to do something different to get things moving and minds spinning.

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