Acquisition Management

R. M. Engelbeck

• Publisher: Berrett-Koehler Publishers
• Year: 2001
• ISBN:
  9781523096121
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Finanzielles Risikomanagement

Your Step-by-Step Guide to Today's Best Procurement Practices"Acquisition Management is a great book for those in the government acquisition business. It is complete and well documented. I was especially impressed with the format which makes it valuable for training people new to the acquisition field and as a reference to those with more experience."
Brig. Gen. James C. Dever, Jr.
USAF (Ret.)
Formerly, DCS Contracting and Manufacturing, Air Force Systems CommandWhether you're a contractor or government personnel, one thing is for sure: The federal procurement process is undergoing a major overhaul. And, to be successful, you must master a host of new methods, rules, and requirements. New from Management Concepts, Acquisition Management is the first step-by-step guide to the government's new strategies and methods for procurement.This new, streamlined acquisition process adopts the best practices of the business world to boost cost-efficiency and reduce the time from contract development to delivery. Acquisition Management prepares you fully to understand and apply these new acquisition techniques, teaching you how to manage contract risk and work more effectively as a member of a multi-functional team. Key Features
• Reviews acquisition principles to help you develop a basis for decision-making
• Gives you step-by-step guidance for every phase of the process, from solicitation to closeout
• Places the procurement process in a risk management context to help you troubleshoot problems and ensure success
• Outlines the roles and tasks of major players in the process to help you work more effectively as part of the contracting team
• Presents pertinent information from the FAR at each applicable point in the acquisition process

CHAPTER
1

Reform of the Federal Acquisition System

This book is written for members of the acquisition team, especially contract managers, to show how they can meet the challenges of change brought about by: (1) the crusade to make the federal government more efficient and user friendly, (2) the end of the Cold War, and (3) improved communications technology. A book on this subject is important because the “Reinvention of Government” initiative of 1994 has kicked off the most extensive revolution in acquisition and logistic processes since the end of World War II. In addition, everyone involved in the buying or selling of goods and services in the federal market must understand the doctrine upon which these changes to the acquisition process are founded and how they will affect how the federal government does business.

The Department of Defense (DoD) adopted the term acquisition in 1970 as an alternative to the term procurement. Acquisition became part of the government-wide regulatory system in 1984 with the issuance of the Federal Acquisition Regulation (FAR).¹ In The Government Contracts Reference Book, the authors point out that the terms acquisition and procurement are synonymous. Procurement is used in the United States Code, while acquisition is usually used in the FAR.² Acquisition is defined in the FAR as:

. . .the acquiring by contract with appropriated funds of supplies and services (including construction) by and for the use of the Federal Government through purchase or lease, whether the supplies or services are already in existence or must be created, developed, demonstrated, and evaluated. Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and management functions directly related to the process of fulfilling agency needs by contract.³

A successful acquisition is built on relationships. Not only is a constructive association between the buyer and seller necessary, but real-time linking between their functional staffs and collaborative relationships within the integrated acquisition team are vital as well. In part this is due to the exponential growth of the Internet and its by-product the Website. These tools are erasing the time, place, and organizational barriers that once made acquisition a line-flow process. The hypothesis of this book is that a proactive approach to acquisition management is a prerequisite to providing the user with a best-value product when and where it is needed. Keys to achieving this objective are to reduce procurement cost through: (1) understanding that the key element in the development of a product or service is a strategic relationship between the contractor and its suppliers, (2) enhancing market research techniques, (3) implementing a cross-functional integrated acquisition team approach, (4) focusing on managing the risks and opportunities associated with the acquisition, (5) using the contract agreement as the common language by all members of an integrated acquisition team, and (6) maximizing the use of electronic data transfer.

The objective of this first chapter is to illustrate how the federal government is responding to pressure from its constituents by being more responsive and cost-conscious. An outgrowth of this initiative has been an effort to change how government will purchase goods and services in the post–Cold War era. Reinvention of the acquisition system started over six years ago when the federal government revised its primary acquisition directive, the Federal Acquisition Regulation (FAR). Among the many changes made to this document was, for the first time, the development and inclusion of a statement of guiding principles and standards. These guiding principles define the core vision of the federal acquisition system. This chapter also addresses the performance standards that were included with the guiding principles because the standards define the critical factors of an effective and efficient acquisition system.

This chapter will also explain why the government’s acquisition system needed to be reinvented by reviewing some of the most significant characteristics of the government market, and then briefly summarizing the history of government acquisition over the past 60 years or so.

CHARACTERISTICS OF THE GOVERNMENT MARKET

In procuring its needs, the federal government wears two hats. First, it acts in a contracting capacity and is expected to exercise good business judgment when determining requirements and purchasing a wide variety of goods and services from every sector of the economy. Second, the government also is the defender of the taxpayer’s interest and is expected to act even-handedly while implementing social and political policies.

The dollar value and number of purchases, i.e., $183.1 billion from 487,264,000 contractual transactions in fiscal year 1999, make the federal government by far the largest buyer of goods and services in the world.

Ten years ago approximately 50 percent of the total dollars spent by the federal government were for supplies and equipment, with other services, excluding R&D, A&E, and ADP services, totaling just over 25 percent. As Table 1-1 shows, expenditures for supplies and equipment in 1999 fell to around one-third of the total. The reduction in defense spending was a major factor in this decrease. On the other hand, the amount spent for services rose to 41 percent. This trend illustrates an increase in outsourcing service-related tasks to contractors in the private sector as well as the effect of government’s increased dependence on electronic data interchange.

In FY 1999 the Department of Defense spent $123.2 billion, or 67% of the total federal contract dollars spent in that fiscal year. The next five top government spenders were the Department of Energy ($15.6 billion), the National Aeronautics and Space Administration (NASA) ($10.9 billion), the General Services Administration (GSA) ($7.6 billion), the Department of Health and Human Resources ($4.1 billion), and the Department of Veterans Affairs ($4.0 billion).⁵ What is significant is that DoD expenditures exceed the other five by $82.4 billion. DoD procurement exceeded the amount purchased by the next four agencies by a factor of three. Consequently, its domination of government acquisition no doubt has a great deal of influence on the policies and procedures contained in the FAR.

Dr. J. Ronald Fox, former professor of business at Harvard and Assistant Secretary of the Army, in his book Arming of America: How the U.S. Buys Weapons, cites the 1962 study of the defense market by Merton J. Peck and Frederic M. Scherer of the RAND Corporation. They concluded that the defense market differs from the commercial market in that it is not determined by supply and demand. First Congress determines how much the DoD will spend and for what. This decision is influenced by political and economic conditions as well as international events and the interests of the members of Congress.⁶ A market system does not now exist in the weapon acquisition process . . . a market system in its entirety can never exist for the acquisition of weapons.⁷

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Table 1-1 Major Categories of Federal Government Purchases⁴—1999

Major Category	Dollars (Billions)	Percent of Total
Supplies and equipment	$57.0	32
ADP equipment, purchases/leases	6.4	3
Research and development	24.5	13
Construction	16.0	9
Architect & engineering	1.7	1
Real property, purchase/lease/maintain	.8	1
ADP services, including installation and maintenance	11.8	6
Other services	64.9	35
Total	$183.1	100

The government market as a whole is also described as being a monopsony, i.e., consisting of only one buyer. Writing in Contract Management magazine, W. Gregor Macfarlan states, “as a monopsony, the government inherently regulates the marketplace to its own ends through defined requirements and specified processes that satisfy those requirements. The more influential the monopsony, the fewer the opportunities for the marketplace to express its competitive dynamics.”⁸

It is only when the government purchases off-the-shelf items on the commercial market that the true forces of supply and demand apply. A majority of goods and services in this category have traditionally been procured through the sealed bidding method. Sealed bid purchases, although high in the number of contracting actions, historically have represented a relatively low percentage of the total dollar value of purchases in any one fiscal year. Negotiated procurements have traditionally led in the number of solicitations and dollar amount. In 1990 solicitations for negotiated procurements equaled 85.4 percent of the total action and 93.1 percent of the total dollars.⁹

Fair and open competition is the core philosophy of our supply-based economic system. It is widely believed that competition generates low prices and promotes efficiency, innovation, and quality. To realize these benefits, federal procurement policy is founded on giving every potential responsible supplier an equal opportunity to meet the government’s needs. For over 100 years procurement procedures also h...