1. Federal Procurement Reform: Change Takes More Than Words April 13, 2010

2. 22 Introduction The Obama administration is currently working to finalize the Federal budget in a fashion more open and transparent than ever before. Still, accountability requires more than transparency. How well are agencies managing the procurement process? To examine these issues, MeriTalk surveyed the Federal procurement community, obtaining input on the current system and identifying key opportunities for improvement. State of the Union: “It’s difficult to work through the current bureaucracy and accomplish goals due to complicated processes and contract vehicles in place.” – Contracting Officer/Specialist *http://www.recovery.gov/About/Pages/The_Act.aspx

3. Executive Summary4 Key Findings5 Recommendations14 Methodology and Demographics15 3 Table of Contents “Procurements are slow because the procurement organization is understaffed. [The] procurement process is confusing, necessitating rework and starting over. Procurement personnel are not held accountable for providing accurate procurement advice.” – Program/Project Manager

4. Savings Opportunity: Federal procurement managers estimate they can save $158B each year with more efficient processes* Room for Improvement: Currently 12% of Federal procurement managers give their agency an “A” for procurement process maturity The Path Forward: Improve Processes: Only 17% of agencies have implemented and are consistently using Earned Value Management (EVM); 14% have implemented and are consistently using Capital Planning and Investment Control (CPIC) Focus on Training: 56% of Federal procurement professionals lack program management training; 59% lack EVM training, compounding staffing shortages Improve Transparency: Only 18% say they plan to leverage technology innovations such as Web 2.0 to report contract ROI 4 Executive Summary Bottom Line: Procurement impacts program performance *For the purpose of this report, we define processes as the sum of all steps agencies take to procure goods and services

5. Federal procurement managers estimate they can save 30% of their budgets with more efficient procurement processes 5 Savings Responsibility *Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php 30% of the FY2008 budget* = $158B Savings opportunity in one year alone Take Away: Massive Savings Opportunity

6. More than one-fourth of Federal programs are late or over budget 6 Management Responsibility *http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/; of Federal Programs are not delivered on time and on budget 28% Take Away: Lack of Commitment No more than 10% of Federal programs over budget/schedule* (Today: 28%) Feds want 18% more programs on budget/schedule $95B in Federal programs that could be better managed (18% of FY2008 contract dollars**) The Goal The Gap The Impact * *Based on FY2008 contracts budget - $527.5B, http://www.fedspending.org/fpds/chart_total.php

7. 7 Self-Assessment Take Away: Process Not Making the Grade Why do we have this opportunity? Only 12% of Federal procurement managers currently give their agency an “A” in procurement process maturity 12%A 36%B 27%C 14%D 4%F 7%Unsure 56% Processes 48% Program/project management 46% Staffing 37% Accountability 32% Technology 32% Oversight 28% Contract vehicles Agency GradesTop Challenges Please grade your agency on its procurement process maturity, including training: What is holding your agency back?* *Managers asked to identify the top three procurement challenges for their agency “[The] contracting office has set up multiple, sequential reviews that routinely result in procurements that take over one year to complete. Contracting office management doesn't acknowledge that some needs emerge over time and cannot be anticipated 1-3 years in advance so they require new contracts for every new need even if it's within scope of the original contract.” – Program/Project Manager

8. 8 Raising the Grade: A How-To Guide

9. Priority: Improve Processes Take Away: What’s the Value of Empty Mandates? 9 Despite mandates and proven impact, Feds are not using EVM and CPIC Agencies are required to use EVM for large procurements*. *http://www.whitehouse.gov/omb/memoranda_fy04_m04-24/, http://ca.com/files/TechnologyBriefs/integrate-it-with-mission-brief_199593.pdf Earned Value Management (EVM): Capital Planning and Investment Control (CPIC): 17% 14% Have implemented and are consistently using EVM Have implemented and are consistently using CPIC

10. Take Away: Consistent Utilization = More Efficient Procurement Why? 10 EVM/CIPIC makes a difference *Graded A or B in procurement maturity Agencies have implemented and consistently use EVM Agencies have not implemented EVM Agencies have implemented and consistently use CPIC Agencies have not implemented CPIC Graded A or B Procurement Grades By CPIC Use*Procurement Grades By EVM Use* The impact of EVM: 47% process maturity improvement The impact of CPIC: 33% process maturity improvement

11. 11 Priority: Improve Training Take Away: You Can’t Mandate What You Don’t Teach More than half of Federal procurement professionals lack training in core competencies “Staff, although they have had recent training, still need to be mentored and guided with regards to how to apply the training to their assignments. Therefore, they need to be mentored on how to prepare a solicitation document that is applicable to the requirement, [and how to] determine the best procurement method, and contract type.” – Senior Procurement Executive 56% Lack program management training 85% Lack CPIC training 59% Lack EVM training

12. 12 Take Away: Lip Service Dis-Service Transparency Issues Procurement professionals say they want to improve transparency, but are not yet taking the plunge Only 18% say they plan to leverage technology innovations such as Web 2.0 to report contract ROI And only 21% say they plan to encourage citizen participation and actively address inquiries 49% Say they want to increase top-down transparency and management But

13. 13 Take Away: One Size Does Not Fit All The Firm-Fixed-Price Debate To streamline contract vehicles, the Obama administration has encouraged the use of Firm-Fixed-Price Contracts Not all Feds agree with this approach – only one-third say it will improve program efficiency “The current trend is to have all contracts be firm-fixed price. There are times when CPFF or T&M are more efficient or appropriate.” – Contract Officer/Specialist Will firm-fixed-price contracts improve success rates? Yes 36% No 38% Maybe 26% “Firm-fixed pricing limits spending, is usually achieved through open competition bidding, and allows the government to cancel at any time if it is in the best interest of the government/taxpayer.” – Senior Procurement Executive “We principally do research and development. Fixed-price contracts will call for higher cost proposals as contractors will want to mitigate the risk to themselves and their shareholders.” – Procurement Analyst

14. 14 Recommendations Federal procurement managers offer advice from the front lines Get With It: Use required best practices Get Hip: Embrace transparency mandates Get Smart: Invest in workforce education Federal procurement managers say agencies need to:

15. 15 Methodology and Demographics MeriTalk conducted the online survey of 200 Federal procurement professionals in January 2010. The total sample size equates to a margin of error of +/- 6.89% at 95% confidence for the group. Organization Type 52%Federal Civilian 32%Department of Defense 16%Contractor Title 3%Chief or Deputy Chief Procurement Officer 4%Senior Procurement Executive 25%Contracting Officer/Specialist 12%Procurement Analyst 32%Program or Project Manager 3%Contract Price/Cost Analyst 21%Technical Analyst/Specialist 100% are involved in the Federal procurement and acquisition process

16. Thank You Liz Vandendriessche – MeriTalk evandendriessche@meritalk.com (703) 883-9000 ext. 146