[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
MOVING FORWARD WITH SERVICES ACQUISITION REFORM: A LEGISLATIVE APPROACH 
                 TO UTILIZING COMMERCIAL BEST PRACTICES
=======================================================================

                                HEARING

                               before the

           SUBCOMMITTEE ON TECHNOLOGY AND PROCUREMENT POLICY

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 1, 2001

                               __________

                           Serial No. 107-111

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform





                       U. S. GOVERNMENT PRINTING OFFICE
81-929                          WASHINGTON : 2002
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                     COMMITTEE ON GOVERNMENT REFORM



                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          ------ ------
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

           Subcommittee on Technology and Procurement Policy

                  THOMAS M. DAVIS, Virginia, Chairman
JO ANN DAVIS, Virginia               JIM TURNER, Texas
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
DOUG OSE, California                 PATSY T. MINK, Hawaii
EDWARD L. SCHROCK, Virginia

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                    Melissa Wojciak, Staff Director
              Victoria Proctor, Professional Staff Member
                          James DeChene, Clerk
            Tania Shand, Minority Professional Staff Member





                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 1, 2001.................................     1
Statement of:
    Soloway, Stan Z., president, Professional Services Council; 
      Mark Wagner, vice president, Federal Government affairs, 
      Johnson Controls, Inc.; Renato DiPentima, president, SRA 
      consulting and systems integration, SRA International, 
      Inc.; Charles Mather, chief executive officer, Acquisition 
      Solutions, Inc.; and Charles Tiefer, professor of law, 
      University of Baltimore Law School.........................    60
    Woods, William T., Acting Director, Acquisition and Sourcing 
      Management; Stephen A. Perry, Administrator, U.S. General 
      Services Administration; Angela B. Styles, Administrator 
      for Federal Procurement, Office of Management and Budget; 
      and Deidre A. Lee, Director, Defense Procurement, Office of 
      the Under Secretary of Defense for Acquisition, Technology 
      and Logistics, Department of Defense.......................     8
Letters, statements, etc., submitted for the record by:
    Davis, Hon. Thomas M., a Representative in Congress from the 
      State of Virginia, prepared statement of...................     2
    DiPentima, Renato, president, SRA consulting and systems 
      integration, SRA International, Inc., prepared statement of    99
    Lee, Deidre A., Director, Defense Procurement, Office of the 
      Under Secretary of Defense for Acquisition, Technology and 
      Logistics, Department of Defense, prepared statement of....    45
    Mather, Charles, chief executive officer, Acquisition 
      Solutions, Inc., prepared statement of.....................   108
    Perry, Stephen A., Administrator, U.S. General Services 
      Administration, prepared statement of......................    19
    Soloway, Stan Z., president, Professional Services Council, 
      prepared statement of......................................    63
    Styles, Angela B., Administrator for Federal Procurement, 
      Office of Management and Budget, prepared statement of.....    26
    Tiefer, Charles, professor of law, University of Baltimore 
      Law School, prepared statement of..........................   132
    Turner, Hon. Jim, a Representative in Congress from the State 
      of Texas, prepared statement of............................     6
    Wagner, Mark, vice president, Federal Government affairs, 
      Johnson Controls, Inc., prepared statement of..............    69
    Woods, William T., Acting Director, Acquisition and Sourcing 
      Management, prepared statement of..........................    10


MOVING FORWARD WITH SERVICES ACQUISITION REFORM: A LEGISLATIVE APPROACH 
                 TO UTILIZING COMMERCIAL BEST PRACTICES

                              ----------                              


                       THURSDAY, NOVEMBER 1, 2001

                  House of Representatives,
 Subcommittee on Technology and Procurement Policy,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:40 p.m., in 
room 2154, Rayburn House Office Building, Hon. Tom Davis 
(chairman of the subcommittee) presiding.
    Members present: Representatives Davis, Turner, Kanjorksi, 
and Mink.
    Staff present: Melissa Wojciak, staff director; Amy 
Heerink, chief counsel; George Rogers, counsel; Victoria 
Proctor, professional staff member; James DeChene, clerk; Tania 
Shand, minority professional staff member; and Jean Gosa, 
minority assistant clerk.
    Mr. Davis. Good afternoon and welcome to today's 
legislative hearing on the Services Acquisition Reform Act 
legislation.
    Because of the time delays we have had, and I appreciate 
your bearing with us and the fact that we're going to have 
votes again in another hour, what I'm going to do is put the 
entirety of my statement in the record, and yield to Mr. Turner 
for any statement he may wish to make.
    [The prepared statement of Hon. Thomas M. Davis follows:]
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    Mr. Turner. I will follow your lead and do the same, Mr. 
Chairman.
    [The prepared statement of Hon. Jim Turner follows:]
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    Mr. Davis. Thank you very much.
    I guess no one else is here to make an opening statement, 
so I'm going to call our first panel of witnesses to testify. 
We have a distinguished panel. As you know, it's the policy of 
this committee that all witnesses be sworn before you testify. 
So if you'd rise with me and raise your right hands.
    [Witnesses sworn.]
    Mr. Davis. Thank you. Be seated.
    To afford sufficient time for questions, if you'd try to 
limit your remarks to no more than 5 minutes. We have a timer 
in front of you. When it turns orange, you have 1 minute left. 
It will be green for 4 minutes, orange for 1 minute and then 
red, and then try to sum up.
    The entire written statement is part of the permanent 
record. We'll begin with Mr. Woods, followed by Mr. Perry, Ms. 
Styles and Ms. Lee. Thank you for being with us.

 STATEMENTS OF WILLIAM T. WOODS, ACTING DIRECTOR, ACQUISITION 
AND SOURCING MANAGEMENT; STEPHEN A. PERRY, ADMINISTRATOR, U.S. 
      GENERAL SERVICES ADMINISTRATION; ANGELA B. STYLES, 
ADMINISTRATOR FOR FEDERAL PROCUREMENT, OFFICE OF MANAGEMENT AND 
   BUDGET; AND DEIDRE A. LEE, DIRECTOR, DEFENSE PROCUREMENT, 
   OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR ACQUISITION, 
        TECHNOLOGY AND LOGISTICS, DEPARTMENT OF DEFENSE

    Mr. Woods. Good afternoon, Mr. Chairman, Mr. Turner.
    I am pleased to be here today to assist the subcommittee in 
its consideration of proposals to improve the Government's 
acquisition of services. We fully support the efforts of the 
subcommittee in addressing this very important issue.
    As we testified before this subcommittee in May, agencies 
face a number of challenges in ensuring that their procurement 
of services are conducted as efficiently as possible. The 
package of proposals the subcommittee is considering, which 
together would comprise the Services Acquisition Reform Act, 
would address many of these challenges. We look forward to 
working with the subcommittee as these proposals continue to 
evolve.
    My statement today focuses on three areas. First, 
strengthening management oversight of services acquisitions. 
Second, improving the acquisition work force and third, moving 
toward a more performance based contracting environment.
    Strengthening management oversight begins with leadership. 
And in this regard, the proposed legislation would create a 
chief acquisition officer within each agency. Such an approach 
is consistent with that of the leading companies in the private 
sector.
    Our discussions with a number of those companies about how 
they buy services indicate that a chief acquisition officer can 
play a critical role in changing an organization's culture and 
practices. Equally important, however, was the corporate 
decision to adopt a more strategic perspective in acquiring 
services. For many companies, this meant taking an enterprise-
wide approach to acquiring services in order to leverage their 
buying power.
    But in all cases, committed leadership was critical to 
realizing efficiencies and improving service levels. These are 
clearly outcomes Federal agencies desire, and we believe an 
agency chief acquisition officer could do much to help agencies 
achieve those outcomes.
    Second, we are pleased to see that a number of the 
proposals are designed to strengthen the acquisition work 
force. Addressing human capital issues in acquisition is not 
just a matter of the size of the work force. It is also a 
capacity issue. While acquisition reforms in recent years have 
helped streamline the process, Federal contracting still 
remains a complex and technical area. The products and services 
the Government buys are becoming increasingly more 
sophisticated, particularly in the area of information 
technology. Yet agencies are at risk of not having enough of 
the right people with the right skills to manage these 
procurement.
    Last, the legislative proposals are intended to promote 
greater use of performance based contracting. Today I would 
like to highlight one particular form of performance based 
contracting known as share-in-savings contracting.
    Share-in-savings contracting can take many forms. But 
perhaps one of the best known examples in Government is the 
Federal Energy Management Program. Under this program, 
contractors are expected to contribute all of the up-front 
costs to identify a facility's energy needs. And then at their 
cost, to install, operate and maintain energy efficient 
equipment. In return, the companies get a share of the energy 
savings generated by these improvements.
    Since 1998, the Department of Energy has issued 57 orders 
under the program. Preliminary indications are that these 57 
orders will allow the agency to obtain almost $150 million in 
capital improvements. In addition, the agency expects to 
realize significant reductions in energy usage, resulting in 
millions of dollars in continuing savings.
    The subcommittee has asked us to undertake a review to 
identify examples of how commercial companies use share-in-
savings contracting. And we look forward to reporting back to 
the subcommittee with the results of that review.
    In conclusion, the increasing significance of service 
contracting has prompted a renewed emphasis by the Congress and 
by the administration on resolving longstanding problems with 
service contracts. We support the committee's efforts, and we 
look forward to continuing to assist the subcommittee in its 
development of the Services Acquisition Reform Act. This 
concludes my statement.
    [The prepared statement of Mr. Woods follows:]
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    Mr. Davis. Thank you very much.
    Mr. Perry, thanks for being with us.
    Mr. Perry. Chairman Davis, Mr. Turner, thank you for the 
opportunity to appear before this subcommittee and discuss the 
acquisition process within the U.S. General Services 
Administration, and to also talk about its impact upon our 
customers throughout the Federal Government. I will also 
outline GSA's views on the proposal in the bill, the Service 
Acquisition Reform Act.
    First, we'll talk a bit about the current state of our 
procurement system as we see it. We are all aware, I think, of 
the significant effort by what was called the Section 800 panel 
in the early 1990's in this area. Following the issuance of the 
Section 800 panel report, the changes to the acquisition system 
have been really dramatic.
    The positive impact of those changes was shown once again 
recently as we responded using our existing procurement 
processes to respond to the attack on September 11th. Literally 
hours after that attack began, we were using these processes to 
acquire and ship protective clothing, including 65,000 suits 
and 5,000 face masks, 3,000 respirators, 1,000 entrenching 
tools, 400 cars, trucks and trailers, 500 phone sets, 250 
cells, just to name a few items. My point being that we were 
able to respond because of some of the improvements that have 
been made to the process over the years. We also were able to 
provide millions of square feet of office space to help re-
establish the offices and 3,200 workstations.
    Even given all this, while the legislative changes that 
have resulted from the Section 800 panel report, namely the 
Federal Acquisition Streamlining Act and the Clinger-Cohen Act, 
which allow us to provide goods and services to agencies in a 
more efficient and cost-effective manner, in spite of all this, 
GSA does believe that the current system could still be 
improved.
    Since the passage of Clinger-Cohen in 1996, GSA has been 
focused in terms of its efforts on ensuring that the 
acquisition work force has the skills and competencies 
necessary to provide the quality services that GSA customers 
require. To ensure that members of our acquisition work force 
have these skills and competencies, GSA has established 
mandatory core training requirements for contract specialists, 
for purchasing agents, for contracting officer representatives 
and for warranted contracting officers. The training is 
provided by private sector vendors, and the syllabus for the 
training was jointly developed by the Federal Acquisition 
Institute and the Defense Acquisition University.
    We also have had an active education program within GSA to 
help our acquisition work force earn undergraduate degrees and 
acquire college level training in business. GSA faces many 
challenges, such as a work force where many of our associates 
are approaching retirement eligibility and an increased need 
for strategic human capital management to ensure that our 
associates have the appropriate skills and competencies.
    Further, the nature of the agency's business requires that 
associates develop specialties for the markets in which they do 
business. Given this, we believe that it requires not only 
training but on the job experience.
    We also need to review the training delivery options and 
evaluate whether our associates have acquired the skills and 
competencies that are necessary to obtain best value as we 
provide goods and services, construction and real estate for 
our customer agencies. We will measure our success both in 
terms of the information retained at the end of these education 
and training programs and also in terms of the improved 
performance that we achieve over time.
    With respect to our views on the proposed legislation, we 
believe that both as a supplier of acquisition services to 
other Federal agencies and as a user of the acquisition system, 
that more could be done to improve the Federal acquisition 
system. However, I must qualify my remarks only to the extent 
that I need to state that GSA has not yet reviewed the draft of 
the bill's language. I'm basing my comments on draft summaries 
of the proposed bill.
    Nevertheless, GSA believes that agencies should make 
training a priority and they should be held accountable for 
determining the current and future needs of their acquisition 
work force. The Government has the ability today to extend 
contract terms based upon reviews of contractor performance, 
rewarding contractors with good performance with longer 
performance terms under the contract.
    In fact, current law and regulations provide agencies with 
the flexibility to incentivize contractors to achieve or exceed 
agreed-upon performance criteria. These tools can be used in 
conjunction with performance based contracting to incentivize 
good performance and thus produce a better return on the 
taxpayers' dollar.
    Finally, we believe that the simplified acquisition 
threshold should be adjusted periodically to reflect inflation 
and to ensure that the original purpose of the legislation is 
in fact achieved.
    In conclusion, Mr. Chairman, I believe that significant 
progress has been made over the past decade improving our 
Federal acquisition system. However, we also believe that any 
legislative proposal must not compromise fundamental notions of 
integrity, competition and transparency. We believe that 
changes we have discussed today could make the Government a 
more efficient buyer of goods and services.
    I'm pleased to offer these comments and that concludes my 
statement.
    [The prepared statement of Mr. Perry follows:]
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    Mr. Davis. Thank you very much.
    Ms. Styles.
    Ms. Styles. Chairman Davis, Congressman Turner, I commend 
your leadership in the area of procurement and I appreciate 
your invitation to participate in today's discussion.
    Service contracting represents an increasing proportion of 
the roughly $200 billion in procurement we spend each year. We 
must ensure that those dollars are invested wisely so that our 
procurement process delivers the cost effective quality service 
that forms the underpinning of successful mission performance.
    As you know, the President has called upon agencies to 
become market based and results oriented rather than process 
driven. If we take away just one message from the President's 
management agenda, it is that results are what matter in the 
end, not just making promises, but making good on promises. The 
message has important ramifications for our procurement system 
which provides a critical link for turning promises made to our 
citizenry into positive results.
    As described in your letter of invitation, the vision 
behind SARA is to ensure that the Government is maximizing 
efficiency for service contracting. While efficiency is 
important, recent reviews of our acquisition processes 
conducted by the GAO, IGs and others, serve as an important 
reminder to our procurement community at large that there is no 
substitute for vigilant application of the acquisition basics, 
namely, sound acquisition planning, consistent use of 
competition, well structured contracts designed to produce cost 
effective, quality performance from contractors small and 
large, and solid contract management.
    Even the most streamlined and efficient acquisition tools, 
such as the multiple award task and delivery order contract, 
and multiple award schedules, cannot produce quality results if 
requirements are inadequately defined, competition is not used 
consistently or price evaluations are weak. My point is not 
that the tools of efficiency are doomed to failure. In fact, I 
share the subcommittee's belief that we can ill afford a 
reduction in efficiency.
    At the same time, Mr. Chairman, I am of the strong opinion 
that we also cannot afford to weaken our resolve in adhering to 
the other basic building blocks of our processes, including, 
importantly, competition, that are critical to securing better 
prices and higher quality. Getting back to basics must be a 
priority.
    I think that SARA challenges us to reassess various facets 
of our procurement process, from our reliance on the commercial 
marketplace and our use of contracting mechanisms that will 
motivate better contractor performance to the effectiveness of 
our current management structures and our investment in the 
acquisition work force. This assessment will prove to be a 
worthy endeavor if it is pursued in an environment where all 
acquisition basics are emphasized and the public's trust is 
fostered through results oriented processes that promote 
fairness, integrity and transparency in addition to efficiency.
    I am of the firm belief that competition is a key to 
integrity. With competition we ensure integrity in the 
expenditure of taxpayer dollars, fulfilling our fundamental job 
as public servants. I want to look at a few examples. In the 
pursuit to buy commercial, we must continue to break down the 
barriers that limit our access to marketplace efficiencies, so 
that agencies have effective Government access to the state of 
art commercial technologies that drive costs down and quality 
up.
    At the same time, we must ensure that our commercial item 
purchases are well planned through meaningful market research 
and negotiated effectively, and we are not simply relying on 
published catalog prices as evidence of fair and reasonable 
pricing. We must further ensure that our policies are not 
stretched to the point where we are no longer able to negotiate 
deals that are in the best interest of the Government.
    We should, for example, be using contract types that 
provide appropriate incentives for our contractors to perform 
efficiently and effectively. And we must not shy away from 
concepts such as performance based service contracting, that 
would enable us to achieve better acquisition solutions from 
our service contractors by fostering their creativity and 
initiative.
    On the other hand, we must be willing to return to the 
basics when our continued efforts to make progress fall short. 
For PBSC, that means reviewing definitional building blocks and 
reaching a common understanding on how to define PBSC.
    I would also like to the pilots of GSA and DOD with PBSC. 
They are good examples for going forward with this type of 
contracting in the future.
    As appropriate opportunities arise, we must seek to be 
innovative but be careful to ensure that our pilot efforts 
yield demonstrable results before they are made permanent. We 
must not endorse tools that have not yet proven their ability 
to help agencies perform their mission successfully.
    Finally, as we identify opportunities for improvement, we 
must distinguish those that require legislative action from 
those that may be better left to executive implementation. 
Business management reforms, for example, may oftentimes be 
more appropriately addressed administratively. This can help to 
minimize the potential for imposing one size fits all solutions 
on agencies with varying structures and roles.
    In the coming months and years, the expectations of our 
citizens will rest heavily on the shoulders of our procurement 
process and its ability to maximize return on taxpayer 
investment at a time in our Nation's history when results count 
more than ever. Meeting this challenge will take work. I 
applaud the subcommittee for its willingness to engage the 
administration in this important dialog.
    The changes in the past decade have enabled agencies to 
satisfy many of its needs more expeditiously. Unfortunately, 
these changes have not as yet been as effective in helping us 
meet more important goals, namely, prices and quality. To make 
progress on all fronts, we must as a start focus on getting 
back to our tried and true proven acquisition basics. Only in 
this way will we ensure the resources entrusted to the Federal 
Government are well managed and wisely used.
    I look forward to working with the subcommittee as we 
embark together to improve the performance of Government. This 
concludes my prepared remarks.
    [The prepared statement of Ms. Styles follows:]
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    Mr. Davis. Thank you very much.
    Ms. Lee.
    Ms. Lee. Good afternoon, Chairman Davis, Mr. Turner.
    I appreciate the opportunity to appear before you today to 
discuss acquisition. Our economy, including the business of the 
Department of Defense, has become more service oriented. Over 
the past decade, the amount spent on services in the Department 
of Defense has steadily increased such that we now expend 
almost $60 billion yearly, or approximately 45 percent of our 
expenditures on service contracts.
    Certainly with this shift, we have and will continue to 
increase our focus on how we acquire and manage services. As 
your SARA bill notes, to achieve excellence in all acquisition, 
we must have a well prepared work force. The Defense 
Acquisition Work Force Improvement Act of 1990 serves as a 
baseline for professional development and certification of the 
DOD acquisition professional. During the last 2 years, DOD has 
initiated an aggressive strategy to invigorate education and 
training, and particularly to provide currency or updated 
skills to our work force.
    To be successful, we recognize that we must reach all 
members of the acquisition community, users, program managers, 
logistics and quality people, as well as the contracting 
professionals. To reach this broad audience, we are using non-
traditional training methods to deliver educational 
opportunities. Since June 1997, the Department's Acquisition 
Initiatives, previously the Acquisition Reform Office, has 
produced 22 satellite broadcasts on a variety of acquisition 
topics. We're using the Web sites and the Internet to 
effectively communicate. We have a defense procurement Web site 
that posts weekly information of use to the contracting 
officers. The DAR Council is now on line and trying to provide 
rulemaking in a more timely fashion. And we will soon move to a 
more interactive forum in that area.
    Specific to services, we have established a Web site that 
links to over 100 templates for guidance in structuring 
performance based acquisitions. We're also moving to be more 
Web based training, including specific topic modules and 
service contracting, both the methods and the successes and the 
challenges, will certainly be one of the early topics to be 
deployed.
    We recognize that program and contract management, as 
mentioned by the GAO, attention to results after contract award 
are vital factors in success, and we must provide more work 
force education and support in these areas. In addition to 
training and more current information, we have developed and 
employed various information technology systems throughout the 
Department to streamline the procurement process. You're 
familiar with many of these, and in the interest of time, I'll 
just mention central contractor registration, electronic data 
access, the Federal Business Opportunities, FedBizOps, where 
everyone can now access all Government-wide opportunities. And 
we are working on the Past Performance Information System, 
which is an automated retrieval, where both industry and 
Government can look at their performance record and consider 
that for future activities.
    But this is certainly not enough, and we have specific 
initiatives regarding services. We've stepped up education on 
how to properly use the schedules, the GWACs and the MACs, in 
regard to competition and specifically services. DOD is leading 
the effort to require all agencies to report in the Federal 
Procurement Data System purchases made by one agency on behalf 
of another. And this information is particularly important to 
us, so that DOD can manage our service dollars and actions.
    We are exploring how the Department oversees very large 
acquisition of services as we go to more base operating and 
more service oriented support systems, and whether this 
oversight process is effective and properly managed. We're 
trying to improve it by developing an oversight policy for non-
hardware acquisitions that will provide senior DOD officials 
the opportunity to ensure that these acquisitions are of the 
highest quality, support DOD goals and follow the Secretary of 
Defense direction.
    I greatly appreciate the committee's continuing interest in 
acquisition and the near term focus on services. I agree that 
we have made much progress but there is always more to be done. 
And on behalf of the Department I would like to affirm my 
commitment to improve the business process, to have appropriate 
oversight and to provide the acquisition work force with the 
necessary support to achieve excellence in all acquisitions, 
including services.
    Mr. Chairman and Mr. Turner, I look forward to working with 
you and your exceptional staff on these challenges, and thank 
you for the opportunity to appear here today. I look forward to 
answering your questions.
    [The prepared statement of Ms. Lee follows:]
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    Mr. Davis. Thank you very much.
    Mr. Perry, I understand you need to leave quickly. Could 
you stay for just a couple questions?
    Mr. Perry. I certainly will.
    Mr. Davis. I'll start quickly and then yield to Mr. Turner. 
We'll focus on you and then get to the rest of the panel.
    Do you think it's appropriate to revisit acquisition reform 
legislatively?
    Mr. Perry. Well, there's always the opportunity for 
improvement, so yes. Yes, to revisit for purposes of 
identifying opportunities for improvement, for sure. I would 
have no hesitancy in subscribing to that.
    Mr. Davis. Do you think that we can effectively clean up 
regulatory and statutory barriers to improved acquisition 
performance without legislation?
    Mr. Perry. That I'm not as sure about. I think that is part 
of what we would need to review.
    Mr. Davis. I think that obviously this committee wants to 
do is to work with all of you to try to see where you need 
legislative help to do it, and we're going to give you some 
suggestions. But to try to work together to craft something 
with Mr. Turner and Mr. Waxman and others that can move through 
and have some meaningful effect on procurement.
    So in our opinion, part of that's a legislative fix, part 
of it can be done administratively.
    Mr. Perry. That would be very prudent, to pursue that and 
to study that and determine the results of that study. At this 
point, we haven't reviewed any document along those lines, but 
we would be inclined to do so.
    Mr. Davis. Well, we'll put something out as a talking point 
and go from there, I think in very short order.
    A couple other questions. Do you believe that the chief 
acquisition officer within each Federal agency could assist GSA 
in performing daily operations?
    Mr. Perry. Certainly there needs to be a person designated 
in each agency or some part of the agency to do this important 
work. Speaking for GSA, we happen to have a position, it's not 
titled chief acquisition officer, but a person who does report 
directly to me for acquisition related matters. And so we would 
advise that other agencies should do something similar.
    Mr. Davis. One of our challenges is to ensure that the 
training and the education which the acquisition work force 
would receive under the work force training fund would reach 
the right people at the right time to provide sufficient depth 
to help program offices implement acquisition reform 
initiatives. We would need to work with you to ensure that's 
being done. That is a tough nugget, basically, how you continue 
to train and retrain people and bring them up to snuff and 
where do you spend that money.
    Mr. Perry. Absolutely. That's the whole issue of what some 
call succession planning and what some call human capital, 
strategic management of human capital. It needs to be done, and 
it needs to be done, as you point out, in a targeted way, that 
is to first identify what the skill gaps are and where they 
are, and then to address those skill gaps, as opposed to having 
a one size fits all approach.
    But that's the issue, having to be at the right place at 
the right time. And I think each agency has to be involved in 
identifying what is the right place and the right time. Again, 
in GSA's case, we have attempted initially, by establishing 
mandatory training for all of our acquisition work force, but 
now are involved in doing competency assessments, so that we 
can have even more targeted training to make sure that we are 
delivering training to the right people at the right time.
    Mr. Davis. In your work with share-in-savings, GAO noted 
that it was often difficult for GSA to approve projects with 
this type of contract vehicle, because agencies have difficulty 
in measuring the baseline. Do you have any tools that you think 
agencies need to have in place to better establish a baseline 
for share-in-savings vehicles?
    Mr. Perry. Well, some of that does come as part of the 
training on performance based contracting, identifying 
performance expectations, understanding what the cost savings 
are and how they will be shared. It's not something that is not 
currently done with some success. So I think we could use the 
models that are in place and provide training to people. There 
may also be some cultural issues, if you will, that are also 
involved in that.
    And some of those cultural issues have to do with the risk 
sharing that comes along with savings sharing, because the flip 
side of sharing the savings is, well, what if there aren't the 
savings, and how do I deal with that in my budgetary process. 
But it could even be structured such that the risk is 
transferred to the private sector partner as opposed to the 
Federal agency.
    Mr. Davis. In the work your agency's done to date with 
horizontal acquisitions, like FTS 2001, you have encountered 
some significant barriers to meeting goals of the contract. 
What do you see as ongoing barriers to greater cross-agency 
acquisition information sharing?
    Mr. Perry. As I understand, some of those barriers are 
potentially legislative, or I should say statutory or either 
regulatory, where there are in fact some parts of statutes that 
make it more difficult for agencies to work with one another in 
that way. Here again, I think that another part of the barrier 
is cultural. We hopefully are daily moving more and more away 
from the cultural barrier that prevents agencies from working 
closely with one another, and even within agencies, to have 
parts of agencies work in a collaborative fashion to the extent 
we should.
    And then last, but I think very importantly, there is also 
the concern about when the objective of this working across 
agencies falls often is efficiency. And that efficiency can 
have an impact on employment. I think that's a real concern but 
one that has to be addressed forthrightly and directly.
    Mr. Davis. Finally, do you think that agencies can 
sufficiently share best practices to improve acquisition 
Government-wide?
    Mr. Perry. Yes. Again, there are models of that being done, 
getting over the barriers of not invented here. But even more 
importantly than that, that cultural issue, is to have an 
effective process for disseminating the information with 
respect to best practices. Even within agencies, I think it 
happens today that a best practice is invented in one part of 
the agency and it's slow to be disseminated to other parts of 
the agency. That only gets magnified when you think about the 
whole Government.
    But I agree with you that it can and should be done.
    Mr. Davis. Those are my questions. Do you have any 
questions, Mr. Turner?
    Mr. Turner. Mr. Chairman, I'll pass in the interest of Mr. 
Perry's time. I can ask my questions in writing.
    Mr. Davis. Thank you very much for being here.
    Mr. Turner, I'll yield to you, any questions you want to 
ask of the panel.
    Mr. Turner. Let me perhaps start with a question of Mr. 
Woods. As I understand performance based contracting, it's a 
broader term that would include the share-in-savings contracts. 
And I understand that we've had, I think one example that you 
cited of a successful share-in-savings contract involved the 
Department of Energy, you mentioned that.
    I'm also advised that there was a share-in-savings contract 
proposed at the Department of Education that would use share-
in-savings contracting for the student financial assistance 
program modernization effort. And that the inspector general at 
the Department of Education found some problems or difficulties 
with utilizing that in that effort.
    Could you describe what type of problems were noted there 
and are there other potential red flags that we ought to be 
aware of when we start talking about moving into this area of 
share-in-savings?
    Mr. Woods. Mr. Turner, I'm not familiar with the inspector 
general's findings. But I do know that we have some concerns as 
we've been looking at share-in-savings. Those concerns are that 
it is very, very difficult for agencies to establish the 
requisite baseline. And that's really the first step in trying 
to approach share-in-savings, is you have to know what the 
activity is costing the agency now in order to use that as a 
starting point.
    And then the other very critical point that we also have 
concern about is being able to establish metrics and outcomes 
for how you're going to determine success. Those are two 
challenges that our preliminary work in this area have 
revealed.
    Mr. Turner. So I take it in the example you cited of the 
Department of Energy that baseline was pretty easy to 
determine?
    Mr. Woods. That was easy, yes, sir.
    Mr. Turner. Where's another example of where it would be 
easy to determine a baseline, so that this type of contracting 
might be valuable or useful?
    Mr. Woods. Well, there's another example that we're 
familiar with in the debt collection area. There are a number 
of programs where the Federal Government is owed debts by 
various companies and individual citizens in some cases. In 
that instance, it might be relatively easy to look back over 
time and see what the collections have been over a given period 
of time. That might establish the requisite baseline. And then 
if there's improvement as a result of the contributions of the 
contractor, it may be relatively easy to use that as the 
baseline to measure the savings.
    Mr. Turner. Share with us some examples of where it's 
difficult to establish a baseline, the kinds of problems that 
we might see in other areas.
    Mr. Woods. I think any time you move beyond the hard 
numbers, for example, let's say we wanted training, for 
example. It's very difficult to establish metrics on training. 
How would an agency be able to repay a contractor based on 
improvements in training of, let's say, the acquisition work 
force? We don't know if that would be very difficult to track 
savings and attribute that to the contributions of the 
contractor.
    Mr. Turner. And legislation that would encourage greater 
utilization of share-in-savings contracts or performance based 
contracts, would it be wise to have some limitation that would 
define the areas where perhaps Federal agencies should not try 
to utilize this type, or should there be some control 
statutorily over the discretion of the agencies to use this 
type of contracting?
    Mr. Woods. I think one approach to that might be the pilot 
program that was authorized a couple of years ago in Clinger-
Cohen. That might get to the issues that you're looking at. To 
be able to test it out on a couple of programs, perhaps, and 
then learn from those programs about what those additional 
legislative requirements and restrictions might be, I think we 
first have to start with some pilots. So far we have not seen 
the pilot program that's authorized by Clinger-Cohen in the 
information technology area carried out.
    Mr. Turner. What other type of performance based 
contracting, other than the share-in-savings approach, do you 
think has the potential for offering some advancements and some 
improvements in our acquisition policies?
    Mr. Woods. I think what the requisite imagination that 
almost any area in the, that the Government procures services, 
could be likely good candidates for a share-in-savings 
approach. Building maintenance, for example, you may be able to 
say, here's what we're getting in terms of, here's our 
standards today, here's what we're paying for that, we'd like 
you to accomplish that same set of standards with whatever 
approach industry wants to bring to it and whatever savings 
results from that, we'll share those savings.
    Mr. Turner. Thank you, Mr. Chairman.
    Mr. Davis. Thank you. Thank you very much.
    Again, it comes down at the end of the day to the 
contracting officer picking the right vehicle for what you're 
trying to accomplish.
    Mr. Woods. Absolutely.
    Mr. Davis. And not all these vehicles work all the time in 
what you want to do. That's where training of acquisition 
officers is so important.
    One difficulty in share-in-savings contracts is that 
corporations that bid them correctly can make a lot of money. 
And there's a huge upside that if you did another vehicle, they 
may not. On the other hand, Government may be willing to try a 
share-in-savings, because there's no downside for Government, 
in ways that they wouldn't otherwise.
    So these are tough calls. I don't think they ought to be 
made from Congress. I think they ought to be made right down 
there on the street where they ought to be made by the 
agencies. And we want to give you the ability to do that. 
That's kind of what it's all about at the end of the day.
    Mr. Woods. Well, they are tough calls, and agencies need 
that flexibility. Frankly, we have not, we as a Government have 
not had that much experience with share-in-savings. Preliminary 
indications are that it is a more widely used, we don't know 
how much, but a more widely used practice in the private 
sector. One of the things that we're doing for the subcommittee 
is to go and take a look at those practices. Then we can report 
back and identify the candidates that are most suitable for use 
in the Government.
    Mr. Davis. Have you noticed what State and local 
governments have done for IT modernization and stuff in the 
share-in-savings?
    Mr. Woods. No, we have not.
    Mr. Davis. I would just say, my experience in local 
government, you get groups like Service Master, that would come 
in areas where we were afraid to go out and try it and say, 
well, we'll guarantee these savings, and it doesn't cost you a 
penny if you don't produce, allowed us to do some things 
otherwise we would have been afraid to undertake. It did 
tremendous streamlining. But again, it depends on the right 
vehicle at the right time for the right purpose.
    In your testimony, you note that many private sector 
companies have created a chief acquisition officer or similar 
position. If legislative language gives agencies enough 
flexibility in determining how such a position is placed in an 
organization, do you think it will allow for greater strategic 
acquisition planning?
    Mr. Woods. Absolutely, Mr. Chairman. We found that to be a 
key attribute of some of the leading private sector 
organizations. And as you point out, flexibility is needed in 
order for the agencies to be able to determine exactly where in 
the organization that person should be.
    But what we found uniformly is that the person needs to be 
at a sufficiently high position in the organization to be able 
to take that strategic look across the organization. We compare 
this somewhat to the chief financial officer or the chief 
information officer at many agencies. We would think something 
analogous to that position might be appropriate.
    Mr. Davis. Have you reviewed the Davis Bacon Act and the 
Service Contract Act thresholds for procurement?
    Mr. Woods. No, sir, we have not.
    Mr. Davis. Would you consider reviewing these provisions 
and provide the committee with an analysis on the impact on 
Federal agency procurement?
    Mr. Woods. Certainly.
    Mr. Davis. I'd like to see some objective analysis in terms 
of where the current thresholds are and the impact that they're 
having. Thanks.
    Although the benefits of performance based contracting I 
think are widely recognized, this type of contracting is still 
in my judgment not sufficiently utilized. To what extent are 
agencies utilizing performance based contracting for services?
    Mr. Woods. Well, in my written statement, Mr. Chairman, we 
pointed out that the reported use of performance based 
contracting is right now at about 15 percent. We'd like to see 
that higher. The administration has set a target for 20 percent 
for this year. Part of the problem is that the definition of 
performance based is not universally shared among all agencies. 
So that's a starting point.
    We will have to review as part of the ongoing review that 
we're doing for the subcommittee about how reliable those 
numbers are, about 15 percent.
    Mr. Davis. OK. Ms. Styles, let me ask you a few questions. 
As I understand my good friend and colleague Steve Horn, who 
chaired this subcommittee previously, tried unsuccessfully on 
several occasions to have OMB and agencies comply with training 
requirements that were set forth in the Clinger-Cohen Act. 
Additionally, he worked tirelessly to get agencies to 
adequately fund acquisition training.
    It's still not an OMB or agency priority, as I look at it. 
What additional efforts do you think can be made to ensure that 
agency budgets are sufficient for acquisition work force 
training, and if we don't establish a centralized fund and 
develop a program based on commercial best practices, do you 
share my concern that we will still have many of the same 
problems that exist today?
    Ms. Styles. Yes, we're very concerned about training. As a 
first step, what we are trying to do, and I think GAO is also 
trying to do, is assess how much we are actually spending on 
training right now. I'm very concerned that before we make 
additional expenditures on training that we know exactly how 
much we're spending.
    The problem that we've seen in the past at OMB is that when 
agencies, and agencies specifically, specifically the problems 
they've seen is that when they call out their training budget, 
that is usually the first one to go when it comes back up to 
the Hill, is that it's easy to cut the training budget so 
they're very hesitant to call it out.
    We need to know what we're spending and we want to move 
forward from there to make sure that they are appropriately 
spending the money and managing the money that's being spent on 
training. We need to know that they're getting the right 
training, that the money is being managed well and that we're 
getting something for what we're spending.
    Mr. Davis. One of our concerns is that we see so much 
contracting going out the door because we haven't done enough 
just training people in-house to do it. We have good, strong, 
capable Federal employees and they're just not getting trained.
    Ms. Styles. I think the training is a major concern for all 
that we've seen go out the door, particularly in light of the 
administration's competitive sourcing initiative. We have to 
focus, and it is one of the Government-side initiatives in the 
President's management agenda, is human capital.
    I think the critical piece of that is the acquisition work 
force. We can't go forward with any of the other Government-
wide initiatives until we have a very good, well trained 
acquisition work force that we recruit well and we retain these 
people well. So we really have to focus on those people, 
because we're not going to manage these contracts well unless 
these people are trained well.
    Mr. Davis. As I read your statement, you talk about the 
concept of a chief acquisition officer, which we've thrown out. 
Do you think that greater flexibility is given to the executive 
branch for the placement of such a position this would help 
agencies accomplish better strategic planning?
    Ms. Styles. There are two sides to this. One is that with 
our freedom to manage initiative, we really don't want to see a 
one size fits all solution in any area. On the other side of 
this, I see some very difficult cultural problems when you look 
at the requirements part of the work force, the management, 
program management and the procurement piece. We've got to make 
these people in the civilian agencies start working better 
together.
    You can see the DOD, these pieces work together well. And 
we need to find a way that does it to give the agencies enough 
flexibility that it isn't one size fits all. Because I think 
you can end up harming some of the smaller agencies that aren't 
as flexible and nimble to put people in appropriate places and 
force them to have a chief acquisition officer in a place that 
might not be appropriate in using their agency's resources 
effectively.
    Mr. Davis. OK. I think that's reasonable.
    In your statement, you express a concern with the, well, 
can you comment on the shared past performance data base that 
was mentioned in Ms. Lee's testimony?
    Ms. Styles. We actually have been working very hard with 
the Department of Defense, NIH and NASA to take the information 
from their data bases and put it into one retrieval system, so 
each one independently keeps retrieving past performance 
information, it's thrown over into a barrier, and we're able 
to, everyone is able to retrieve information from other 
agencies on past performance.
    Mr. Davis. OK, thank you.
    Ms. Lee, I've got a few questions for you. It's my 
understanding that DOD is currently pursuing more hiring 
flexibility and Civil Service flexibility for acquisition 
personnel. Can you comment on these efforts, and do you think 
that a work force exchange program would benefit DOD 
acquisition personnel?
    Ms. Lee. Yes, sir, human capital is an issue. As you know, 
one of the significant decreases has been at the Department of 
Defense. We've downsized our total acquisition work force 
substantially. So we have the real challenges of, I like to 
say, treating the people we have now right, because we do need 
to have them be the mentors and we do need to have them 
continue to support our work.
    We also need to look forward to the future at how we're 
going to recruit and train those new people. But certainly some 
flexibility in hiring those people. Right now it is 
discouraging for a college graduate to be at a fair, we've 
increased the affirmative education requirement for the 
Department of Defense. Now it must be a college degree plus 24 
hours. So we certainly go out and try to recruit these people.
    And we can't offer them a job for an extended period of 
time, versus they can immediately be offered a job. As we all 
know, as parents, it's good to get them off the payroll, so you 
like when they pick up the jobs. So I think we need to find a 
way to more quickly access the folks. We also need to look at, 
with that very stringent, which I support, educational 
requirement, the direct hiring right now to the 3.5. We've 
talked informally about could we change that to allow ourselves 
to have a larger pool to access.
    Mr. Davis. How do you think expanding the current 
definition of commercial services under FAR Part 12 would 
affect DOD service contracting?
    Ms. Lee. There are two pieces on commercial. Right now, and 
I'm trying to focus our folks as well, there's calling, buying 
a commercial item and using the Part 12 procedures because you 
are purchasing a commercial item. I also think there are cases 
where we ought to use commercial like procedures for the 
purchase of an item, whether that be a truly commercial item 
with some additional uniques, or whatever.
    So I'm looking at how can we have more simplified 
procedures for purchases and continue to support commercial 
item procedures.
    Mr. Davis. OK. Would you comment further on the DOD PBSA 
guide? How is the work force utilizing this guide? And can you 
further elaborate on the issue that needs to be addressed as a 
result of your PBSA conference discussed in your testimony?
    Ms. Lee. We certainly identified in the performance based 
service contracting, as everyone has said here, and I think as 
Ms. Styles eloquently put, no matter how well the contracting 
people understand it, we've got to have the rest of the team 
there. That is the user and the program manager have got to be 
thinking about their need in terms of a performance based 
standard and a measurable result.
    So one of the things we found from our conferences, we can 
educate the people on how to get the contract in place. But 
we've also got to work with the rest of the community to make 
sure that they're on board as well and thinking more results 
oriented and more measurable. It's been a big challenge.
    Mr. Davis. How does DOD view the proposed use of longer 
term and award term contracts? What measures could you take to 
ensure good performance? For instance, the proposed base year 
for multi-year service contracts is 7 to 10 years. Is this too 
long, even with the provisions to shorten the performance 
period for poor performance?
    Ms. Lee. It certainly depends on the product or service. It 
depends on the investment that needs to be made up front for 
that particular product or service. So I think you need to, 
again, you need to have it and look at the individual 
procurement and make the right decision. We currently can use 
and are using award term contracts, which is an elegant way of, 
if someone is performing. We found this through studies, that 
one of the motivators of companies was continued work, and the 
ability to have that work planned ahead.
    So what we have now in award term is when someone is 
performing well, we can give them an additional time period of 
performance as a recognition of that. I think that helps us 
with that as well.
    Mr. Davis. Do you think it's appropriate to revisit 
acquisition reform legislatively?
    Ms. Lee. Sir, we've always got ideas. And there's more that 
can be done.
    Mr. Davis. OK. Thank you very much.
    Mr. Turner.
    Mr. Turner. Mr. Woods, what would your opinion be regarding 
providing incentives to a contractor when the contract expires, 
if they've done a good job, to give them some financial 
advantage in the rebidding process? Is that a good idea, or is 
there really no reason to provide that kind of performance 
incentive?
    Mr. Woods. I think the better performance incentive, 
frankly, might be the award term provision that Ms. Lee just 
mentioned. In that situation, all of the contractors would 
compete up front, knowing that if they perform well in the 
contract itself, there would be a provision for extending the 
contract for good performance. That might be the better way to 
go.
    Mr. Turner. When we get into acquisition reform, the issue 
of the Davis Bacon Act always comes up. In many ways, certain 
reforms could have the effect of undermining the protection 
that Davis Bacon was intended to give to workers. Could you 
describe briefly what kinds of issues that we need to be aware 
of that would in effect erode the protections of Davis Bacon, 
and are there ways, perhaps, these issues could be dealt with 
without having to deal with the Davis Bacon issue that 
inevitably, I think, perhaps comes up? But is there some way to 
avoid that in terms of trying to address acquisition reform?
    Mr. Woods. As I said earlier, Mr. Turner, we have not 
looked at Davis Bacon in quite a few years. I would not be 
prepared, at this time, I think, in response to the Chairman's 
question, we'll be doing some work, but we're not really 
prepared to address that at this time.
    Mr. Turner. Thank you. Thank you, Mr. Chairman.
    Mr. Davis. I'm not sure we're ready to address it either, 
but I thought I'd ask the question or some questions to get a 
baseline on it. And there are a lot of stakeholders on that I 
think we'd want to hear from before we go anywhere. But it 
would be nice just to hear your input into it.
    Mr. Woods. Sure.
    Mr. Davis. Let me just thank this panel. I appreciate your 
bearing with us and we look forward to continuing to work with 
you on acquisition matters.
    Let me take a 2-minute break as we get our next panel up.
    We welcome this panel to the witness table. Stan Soloway of 
PSC, Dr. Renato DePentima, of SRA International, Mark Wagner, 
of Johnson Controls, Charles Mather of Acquisition Solutions, 
and Dr. Charles Tiefer, of the University of Baltimore Law 
School. Thank you all for being with us.
    As you know, it's our custom here to swear in our 
witnesses. Rise with me.
    [Witnesses sworn.]
    Mr. Davis. Mr. Turner has informed me we have votes 
scheduled in about 20 minutes, 25 minutes. We've read the 
testimony. Everything that you have is in the record. So you're 
given 5 minutes to say what you need, with the usual rules. But 
to the extent that we can expedite that, we can get into 
questions a little longer.
    Mr. Soloway, thanks for being with us. We have a translator 
here, so you can do that.

STATEMENTS OF STAN Z. SOLOWAY, PRESIDENT, PROFESSIONAL SERVICES 
   COUNCIL; MARK WAGNER, VICE PRESIDENT, FEDERAL GOVERNMENT 
AFFAIRS, JOHNSON CONTROLS, INC.; RENATO DI PENTIMA, PRESIDENT, 
  SRA CONSULTING AND SYSTEMS INTEGRATION, SRA INTERNATIONAL, 
  INC.; CHARLES MATHER, CHIEF EXECUTIVE OFFICER, ACQUISITION 
    SOLUTIONS, INC.; AND CHARLES TIEFER, PROFESSOR OF LAW, 
               UNIVERSITY OF BALTIMORE LAW SCHOOL

    Mr. Soloway. Mr. Chairman, members of the committee, thank 
you very much for the opportunity to testify before you today 
on an important and timely piece of legislation. I am Stan 
Soloway, president of the Professional Services Council, the 
principal national trade association of the professional and 
technical services industry. Our diverse membership includes 
more than 130 companies performing information technology, 
engineering, maintenance, high-end consulting and many other 
critical services for virtually every agency of the Federal 
Government.
    Today the professional and technical services sector 
accounts for more than $125 billion Federal spending per year, 
and that amount is certain to rise. Indeed, it is clear that 
the Government's partnership with and reliance on the 
competitive, commercial services sector must continue to evolve 
and grow if the Government is to access and capture the cutting 
edge solutions that will enable the Government to optimize its 
performance and deliver excellent service to its citizens. For 
that reason, Mr. Chairman, we applaud your leadership and 
commitment to fostering an environment that will enable that 
vital partnership to grow.
    We gather today at a unique time in our history, a time of 
uncertainty, real peril and unique challenges. Some have 
attempted to use the current crisis as an excuse to roll back 
the clock, to suggest that the Government's focus on its 
partnership with the private sector should be put on hold, and 
that one of our Nation's responses to this crisis should be to 
curtail our commitment to the public-private partnership and 
outsourcing.
    Mr. Chairman, as you, through your words and leadership 
have said, such a response is both ill conceived and certain to 
be counterproductive. So many of the skill sets and 
capabilities the Government needs, and will continue to need, 
in its long battle against the scourge of terrorism of all 
kinds, are resident today in the competitive private, not 
public, sector. Moreover, beyond immediate national security 
needs, the Government's responsibility to ensure that the 
remaining, and vast majority, of its missions are executed in a 
manner that optimizes both performance and efficiency has never 
been greater. That will not happen if the Government crawls 
back into its protective shell; that can only happen if the 
Government aggressively seeks to bring the pressures of the 
competitive marketplace to the Government monopoly.
    Indeed, if one reviews the Government's expenditures for 
services over the last decade, there's been a fundamental shift 
in the type of services being acquired. We've seen declines in 
research and development, operations and management of 
facilities, and maintenance of equipment, areas in which the 
Federal work force has also been reduced. And we have seen real 
increases in architectural/engineering, professional services, 
information technology and medical services, increases that 
track with those areas in which the Government has sought to 
expand its work force and areas in which the Government has the 
most difficulty competing with the private sector for people 
and skills. Nonetheless, far too many highly innovative, 
cutting-edge providers remain wary of the Government market and 
all too often opt not to participate.
    And that, Mr. Chairman, is why this legislation is even 
more critical today than when you first began work on it many 
months ago. Our collective need for smart, flexible, open and 
effective policies and processes for the acquisition of 
services of all kinds has never been greater. Over the past 
decade, we have made tremendous progress in the acquisition 
process. Much more progress can and must be made, and this 
legislation will help significantly. The acquisition reforms of 
the last decade were designed to achieve many goals: greater 
access to the commercial sector and its innovative offerings; a 
greater focus on performance, past, present and future; more 
open communications between buyer and seller; greater degrees 
of flexibility and innovation; and the beginnings of a true 
partnership that both serves the needs of the Government 
customer and protects the interests of the American taxpayer.
    Imperfect as the process is today, the reforms of the last 
decade have put us on the right path and we cannot afford to 
stray from it. There are those who think more reform is unwise, 
that somehow the reforms of the last decade were significantly 
misguided and focused primarily on administrative convenience. 
One paper I recently read suggested that a good measure of the 
failure of acquisition reform has been the decrease in lawsuits 
and disputes which, the author maintains, is indicative of a 
process that doesn't work and is too focused on the kinds of 
administrative convenience that can lead to bad decisions and 
implementation. Such arguments miss the point of previous 
reforms and the need for further process change and 
improvement.
    Mr. Davis. Stan, is your microphone on?
    Mr. Soloway. The timer is, does this mean I get to start 
again?
    Mr. Davis. No, it's all in the record.
    Mr. Soloway. OK.
    Mr. Davis. We had some debate whether we ought to turn it 
on or not. [Laughter.]
    Mr. Soloway. We strongly support your proposal to dedicate 
to acquisition work force training a percentage of the 
administrative fees collected through multiple award 
Government-wide and GSA schedule purchases. The Government 
simply has not made the investments in its people that are 
necessary to foster the kind of high performing business savvy 
environment the Government needs and the taxpayer deserves.
    In a time of tough budgets, such critical elements as 
training too often are the first to fall by the wayside. When 
the business environment is more dynamic than ever and changes 
in solution sets are a daily occurrence, it is crucial that the 
Government make that investment.
    By creating this fund, we believe the resources finally 
will be available to achieve that highest order of priorities. 
The Government is blessed with an acquisition work force of 
committed people. If you give them the tools, they can do great 
things. And the most important tool is training.
    The proposal for a Government industry exchange falls into 
this same category. As you may know, when I was at the Defense 
Department, we proposed a similar concept. And you of course 
have been the leader in creating the Digital TechCorps. We 
believe this concept not only will greatly enhance the 
knowledge base of the Government's acquisition corps, but also 
be the kind of career enhancing experience that people so often 
look for in their workplace.
    The legislation's call for a regulatory review process is 
also timely and important. Many regulations and policies that 
worked in the past are irrelevant in today's environment. 
Worse, they continue to serve as inhibitors to the full 
engagement of the competitive technology marketplace. One good 
example is the treatment of intellectual property, a subject on 
which this committee has already held hearings, and one on 
which I believe you need to continue to focus your attention.
    Finally, the legislation places a vital spotlight on 
contract incentives, on that wide range of business 
arrangements that can drive higher performance. Share-in-
savings concepts, award term contracts and more provide the 
right kinds of incentives and are essential elements of 
performance based acquisition, are proven to drive efficiency 
and performance, and are advantageous for all concerned.
    Some have argued illogically that such incentive strategies 
disadvantage the Government. If a supplier, however, is able to 
drive down costs beyond initial expectations and deliver the 
same or better levels of performance than initially contracted 
for, how could that represent a disadvantage for the Government 
or any other buyer? And why would we not want to reward such 
innovation and excellence?
    Mr. Chairman, let me again express our deep appreciation to 
you and the committee for your leadership. The Services 
Acquisition Reform Act is an important legislative initiative 
that has our full support. Moreover, we stand ready, 
particularly when it comes to the all important training and 
education that must accompany its implementation, to play an 
active role in helping to foster the kind of services 
acquisition and management environment we all seek.
    Thank you very much for your time today. I'll be happy to 
answer any of your questions.
    [The prepared statement of Mr. Soloway follows:]
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    Mr. Davis. Thank you.
    Mr. Wagner.
    Mr. Wagner. Thank you, Mr. Chairman.
    My name is Mark Wagner, and I do work for Johnson Controls, 
but I'm also here on behalf of the Contract Services 
Association, representing 330 member companies with a wide 
range of Government services. I might also add, I'm a resident 
of the 11th District of Virginia and very well represented, I 
might add, in Congress.
    Mr. Davis. You can have a couple extra minutes. [Laughter.]
    Mr. Wagner. Thank you. I appreciate that.
    We're pleased that you've recognized the need for SARA, Mr. 
Chairman, and applaud yours and the committee's effort. I'd 
just like to touch on three points because you've got my 
statement in the record. First, acquisition work force training 
and performance based contracting, second, shared savings and 
third, the economics of service contracting.
    I combine work force training and performance based 
contracting because they're inextricably linked. If we don't 
properly train our acquisition work force in the ways of 
performance based contracting, we'll never increase the number 
of performance based contracts in the Government today.
    Learning how to develop a performance based contract is 
hard. It's not easy to write a request for a proposal that 
addresses the proverbial issue, tell the contractor what you 
want, not how to do it.
    It takes perseverance and a change in mind set to do things 
differently, not to rely on all of the specifications that clog 
our Federal shelf space, that have told us over the years how 
to do things. Acquisition professionals need to resist the 
temptation to grab those specs, insert them in the RFP, call 
for metrics on a large number of those specs and then call it 
performance based contracting. Frankly, that's the worst of 
both worlds.
    Learning how to write a performance based contract is only 
the first step. As Dee Lee mentioned, there's also a need for 
training in the source selection under a performance based 
contract. Acquisition teams need to apply more rigorous due 
diligence in selecting contractors, particularly for large, 
best value contracts.
    Finally, we must make sure that during the performance of 
the contract we don't backslide into old ways and to allow the 
spec based approach to take over the administration of the 
contract. SARA can go a long way in addressing these issues.
    With respect to share-in-savings, we've already discussed 
the issue of baselining. We've got some personal experience in 
ESPC, and frankly, I can tell you it's easy to baseline those 
contracts. It's the best example of shared savings.
    But we've also had some experience in base operation 
support contracts with shared savings that tried and have 
failed, they haven't worked. One of the other problems is, you 
have to be able to adequately measure the savings that you're 
going to apply to the project. If the payback isn't there, the 
contractor is not going to have the necessary incentive to 
develop those efficiencies in the first place and those shared 
savings will fail. Title III of your proposed legislation 
proposes improvements in shared savings, and I hope we can 
address those issues.
    Finally, this legislation goes a long way in addressing the 
systemic problem in service contracting by accelerating 
payments on contractor invoices. This will not only benefit 
contractors, but the Government as well, by lowering the cost 
of services to the Government. As service contractors, we don't 
make products or supplies or weapons systems. Much of our 
invoices to the Government are to cover paychecks we issue to 
our workers.
    Currently, the Government waits the full allowable 30 days 
before paying an approved invoice, despite the fact it could be 
paid much quicker, particularly in this age of electronic 
payments. This means that contractors will actually have a lag 
time of at least 50 to 60 days between having to meet payroll 
and being paid for the work performed.
    Extended payment cycles put the burden of financing the 
capital costs on the contractor. While interest payments can't 
specifically be charged to the Government, the carrying costs 
of this debt is ultimately going to be reflected in the margins 
that contractors include in their bids. For small businesses, 
this can mean being able to make the next payroll or maybe even 
survival. The only one benefiting under this current payment 
scheme are the bankers. We're very pleased that your 
legislation will address this payment problem.
    Thank you, Mr. Chairman, for the opportunity to testify 
today. And thank you very much for introducing SARA.
    [The prepared statement of Mr. Wagner follows:]
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    Mr. Davis. Well, thank you very much.
    Dr. DiPentima.
    Mr. DiPentima. I'm testifying today on behalf of the 500 
corporate members of the Information Technology Association of 
America. Having said that, I should state up front that I have 
a personal interest in acquisition reform. Prior to joining 
SRA, I was for many years the Deputy Commissioner and CIO of 
Social Security. As such, I chaired the initial IT----
    Mr. Davis. You've been on both sides of it, then.
    Mr. DiPentima. I've been on both sides, that's really my 
point.
    I chaired the IT acquisition review board, whose findings 
were in large part encompassed in FASA and in Clinger-Cohen. So 
I've sort of enjoyed the argument from both sides of the table.
    I'd like to focus very briefly on just some of the elements 
of the legislation. First of all, I concur with the recognition 
that there is a training gap and a dearth of experienced 
acquisition professionals. Despite the passage of Clinger-Cohen 
in 1996, its implementation has been inconsistent from agency 
to agency. It has been my observation that as a matter of 
practice, the emphasis has been on audit requirements rather 
than on the act's training provisions. I believe there is a 
demonstrated need for a civilian equivalent of the present 
acquisition work force vested in the Defense Acquisition Work 
Force Improvement Act.
    The Service Acquisition Reform Act would establish an 
acquisition training fund paid by the administrative fees of 5 
to 10 percent collected from existing fees on Government-wide 
multiple award contracts. ITAA has not taken a position on 
those financing mechanisms. As president of a company with a 
portfolio of Government-wide acquisition vehicles, in fact, we 
did over $200 million in GWAC awards last year, I would support 
the funding mechanism. The earmarked funds are minimal compared 
to the benefit of a better trained GWAC acquisition work force.
    There is a crucial need for trained acquisition 
professionals to facilitate speedy procurement through the 
GWACs and the schedules in response especially to the recent 
national emergency.
    ITAA agrees that performance metrics for such training are 
important. Such metrics might include agency confirmation of 
every contract officer's knowledge and skill level before his 
or her warrant is granted. ITAA supports establishment of a 
chief acquisition officer role to be held by a career employee 
within an agency who should serve as an agency representative 
to the procurement executive council. From my own experience in 
procurement reform, and currently as the chairman of the 
industry advisory council's CIO liaison committee, I also agree 
with this. It would be especially useful if this type of 
position would foster improved strategic planning for major 
acquisitions.
    Third, revision of the standard payment terms will benefit 
Government and industry. Remedies that would eliminate routine 
delays in payments would aid small and large businesses alike. 
Another important reform to streamline timely payment would be 
the elimination of pre-validation requirements.
    Finally, rigorous implementation of the fiscal year 2001 
National Defense Authorization Act, particularly emphasizing 
elimination of overly burdensome paperwork requirements, would 
be a welcome improvement. To my knowledge, little has changed 
since 1995 when I left Government service. To cite one example, 
and I wish it wasn't true, at the Government direction, my 
company has spent days of manpower reporting on billing a 
discrepancy of 1 cent. We rounded the wrong way and billed the 
Government incorrectly by 1 cent. We spent somewhere between 
$3,000 and $5,000 correcting this paperwork.
    ITAA and others in industry stand ready to support this 
legislation.
    Finally, I noticed some institutional resistance to 
performance based contracting and share-in-savings, despite the 
Government's publicized interest in pursuing them along with 
other commercial items, procurement under FAR Part 12. ITAA 
members, SRA and our industry partners in the professional 
service business would benefit from expanding the commercial 
acquisitions to include services. The Government would benefit 
most.
    However, while the FAR currently recognizes performance 
based contracting as an allowable cost, there is no general 
agreement about the content, style or format of performance 
based contracts. Most would agree that a contract is 
performance based if it specifies results instead of processes 
and includes measurable performance standards, clearly defined 
by the customer. The Government should decide what it wants and 
convey those requirements clearly and succinctly to industry.
    Since this legislation contains so many reforms of vital 
interest to the IT service sector, it is impossible to address 
them all.
    Of course, you have our written statement. Mr. Chairman, I 
thank you for your attention, and we'd be happy to answer any 
questions you may have.
    [The prepared statement of Mr. DiPentima follows:]
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    Mr. Davis. Thank you very much.
    Mr. Mather.
    Mr. Mather. Mr. Chairman, distinguished subcommittee 
members, ladies and gentlemen, it is a privilege and honor to 
appear today before the House Subcommittee on Technology and 
Procurement Policy. My name is Chip Mather, and I'm a partner 
with Acquisition Solutions, Inc., a company which I co-founded 
to assist Government agencies to identify and implement 
acquisition best practices.
    We currently provide acquisition support services to over 
60 Federal agencies, which provides us a unique understanding 
of the considerable challenges agencies face in implementing 
new acquisition policies and practices. From that knowledge 
base, I'm pleased to have the opportunity to offer opinion and 
perspective on the proposed Service Acquisition Reform Act and 
how your actions will serve as a positive force to assist 
agencies to take full advantage of commercial best practices in 
acquiring services.
    In the time I have from my prepared statement, I first want 
to commend Chairman Davis and the committee for focusing their 
attention on this important topic. Service contracting has 
increased in both size and importance within Government 
acquisition. In 1985, services accounted for 23 percent of the 
Federal contract dollars. Today that percentage has nearly 
doubled and is still growing.
    But perhaps more important, yet I think little understood, 
is the significant transformation agencies are undergoing in 
acquiring these services. Agencies are going from being the 
direct provider of service to the citizen to managing 
contractors who are the service provider. Clearly, the 
acquisition of services is an increasingly critical factor in 
agencies' ability to perform their mission and provide service 
to their constituents.
    However, it is also clear there has been little change in 
the way agencies plan, acquire and manage service contracts. 
While a gross generalization, we believe current legislative 
budget and acquisition systems are for the most part still 
focused on buying capital assets, things, and not acquiring 
results. For example, as someone who has witnessed the power of 
performance based contracting and the positive results that 
occur when both parties focus on the outcome and results, I am 
struck by how this truly superior method of acquisition has had 
limited implementation within the Federal Government.
    That is why we believe the proposed SARA legislation is so 
important. It identifies and removes legislative impediments to 
implementing innovative service acquisition methods, such as 
share-in-savings incentives. It raises the dollar thresholds on 
Service Contract Act and Davis Bacon Act from levels set 40 
plus years ago. It authorizes the use of additional contract 
types and clarifies definition of commercial items, both of 
which will make it easier for agency use to FAR Part 12, 
acquisition of commercial items for their service requirements.
    Perhaps of greater significance, the proposed legislation 
contains what we consider are two critical components that have 
the power to appreciably improve the Government's acquisition 
of services. First, the legislation provides an alternative 
funding mechanism to provide much needed training to the 
acquisition work force. You cannot do expert level buying with 
people who have not had expert level or even advanced 
acquisition training.
    Even in the best of years, the training budget available 
from traditional funding methods has failed to meet the new 
demands of a professional acquisition work force. Improved 
training opportunities for the acquisition work force is more 
important than ever in the face of downsizing, retirements and 
changing workplace demographics. The proposed acquisition work 
force training funds would guarantee that much needed funds 
were available to help ensure that critical training 
requirements were being met.
    Second, the establishment of a senior acquisition official 
will move acquisition from the back room to the board room 
within civilian agencies. Long recognized as a strategic 
function within the Department of Defense, the establishment of 
a senior acquisition official will provide a strong voice 
within agencies of the importance of horizontal acquisition. 
Through the office of a senior acquisition official, the 
essential alignment of the goals and objectives of the 
acquisition will be integrated with the agency goals and 
objectives.
    Consider this: if agencies' heads asked how much of their 
budget, and by extension, their agencies' service delivery, was 
expended through contracts or grants, I think they would have a 
significantly different view of the role of acquisition in 
their organizations. One cabinet level department, budgetary 
object class data indicates that a full 60 percent of their 
budget authority is expended through contracts and grants. By 
any measure, the office that is responsible for this level of 
support must be viewed as a strategic asset.
    Your proposed establishment of a senior acquisition 
official recognizes the strategic value of acquisition and 
places the appropriate focus for this function within an 
agency. We understand that implementing change of the magnitude 
necessary to alter the Government's acquisition processes to 
focus on results requires a multi-faceted approach to identify 
and remove legislative and regulatory impediments, provide 
proper incentives, positive and negative, and hold managers 
responsible for results.
    One thing is clear. This is not just a procurement problem. 
Acquisition is much larger than procurement. Implementation of 
a new service acquisition model that adopts and embraces the 
best practice of the commercial section requires the collective 
efforts of Congress, the administration, senior agency 
officials, program managers, requestors, contracting officers 
and industry. There must be top down support, bottom up 
implementation.
    In closing, we at Acquisition Solutions commend Chairman 
Davis and the committee for proposing legislation that focuses 
on the vital role of service contracting. We believe that SARA 
is an important step to moving the Government to a new model 
for the acquisition of services.
    Thank you, and I'll be happy to answer any questions the 
committee might have.
    [The prepared statement of Mr. Mather follows:]
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    Mr. Davis. Thank you very much.
    Professor.
    Professor Tiefer. Thank you, Mr. Chairman. I'm Professor 
Charles Tiefer and the author of ``Government Contract Law: 
Cases and Materials.''
    I'm going to launch into a couple of points on the bill. 
First of all, I have already, with respect to what the bill 
would do with respect to the Davis Bacon Act and the Service 
Contracting Act, I sense from what I've heard already today 
some tentativeness in legislating in this area. I think that 
tentativeness is well advised.
    The history of successful procurement reform legislation is 
that it needs to be bipartisan. The particular sub-proposal 
there to exempt commercial subsidiaries on commercial contracts 
from these statutes is not simply a matter of trimming the way 
these statutes work, it's not just a matter of easing the 
paperwork burdens. It would make a partial repeal of these 
statutes, including when they applied to very large contracts 
affecting very large numbers of employees. I think it would be 
a polarizing and ideological proposal, and I think it would 
bring down on the bill the kind of opposition that would hold 
the bill back.
    Second, and that's the only provision of the bill I'm 
saying that about, second, the bill has a provision that would 
say that if a traditional Government contractor creates 
something that's called a commercial business segment, this 
segment of the business would be treated as though it was 
selling commercial products, which I take to mean that it would 
be exempt from the Truth and Negotiations Act, be exempt from 
TNA.
    There is no safeguard built into this provision. It is very 
easy for a traditional Government contractor, like a General 
Dynamics or Lockheed, to gerrymander its products to say, oh, 
let's create a division and we'll put all our small numbers of 
commercial products and our small numbers of privately sold 
products in there, and now it's a commercial division.
    And on that basis, if I understand how the provision would 
work, that division would be free to engage in what would 
otherwise be defective pricing. Without safeguards, a provision 
like that is dangerous.
    The third provision I would comment on in the bill, and 
here I am not speaking for consensus of the witnesses, to put 
it mildly, is that I express a number of cautious about share-
in-savings programs. They have been tried in some areas, but in 
other areas they have not been tried. They have the potential 
to be very risky.
    First of all, something that's not been said about them is 
that they are a back door financing provision. They are a 
provision by which a program that is not getting money from the 
appropriations, through the appropriations prices, gets 
financed by contractors. Under some circumstances, what that 
means is the Government is borrowing from the contractor, 
instead of, which is expensive, because contractors borrow in 
the marketplace, at higher interest rates.
    Furthermore, there can be a long term lock in. Imagine if 
10 years in 1991 we took a 10 year lock in contract and the 
contractor said, well, I will do better over the next 10 years 
than our current technology, which at that time would have been 
286s or 386s. And over the following 10 years, while in general 
arrangement one could have changed contractors, changed 
technology, the contractor would say, it's not economical for 
me, I'm still saving the Government over what it was doing in 
1991 by keeping those 286s and 386s in place.
    Well, 10 years later you don't want to be using the 
technology that you were using 10 years ago. So that's the risk 
with the long term lock in arrangement which is SIS.
    I'm going to simply say in conclusion that I salute the 
Chairman, Mr. Davis, and I salute the Ranking Minority Member 
Mr. Turner for holding this hearing. There is a great tradition 
on this committee going back to Jack Brooks and Frank Horton, 
who to my mind wrote the Competition and Contracting Act in 
this room. Procurement reform legislation is a thankless task. 
You have to put in long hours. It's pretty tedious on arcane 
points. I'm appreciative that you're doing it.
    [The prepared statement of Professor Tiefer follows:]
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    Mr. Davis. Thank you very much.
    Professor Tiefer, I'm going to start with you. I'm so glad 
you're here, because it's good, when you have everybody 
zigging, to have somebody zagging a little bit. I have a couple 
questions. I recognize from a Davis Bacon perspective 
politically what that does to any proposal. And we want to get 
a proposal through.
    But I just would ask this. If we get a report from GAO and 
it talks about the thresholds, losing Government money and 
maybe they ought to be readjusted for inflation or whatever, 
and we don't move ahead because it's politically not viable, my 
question is, who's being ideological about it? Not that I'm not 
very pragmatic about it, and that I even want to reach it.
    I want to see what the facts are, and I think we have that 
duty to the public, to lay out what the facts are before we 
proceed. But if nothing else, I'm a realist, and there are some 
very good things I think we can move through here and I can 
assure you I want everybody at the table before this thing 
moves. Not everybody is going to like every piece of it. That's 
why I appreciate your being here today.
    Share-in-savings contracts, they can be risky, but I think 
they're riskier for the contractor, having sat on that side, 
than they are for the Government. Because the downside is 
really borne by the contractor. A tremendous upside could be 
gained.
    But having been in local government and having been in 
charge, you're the No. 1 guy in a local government, which has 
the second largest county budget in the country. Share-in-
savings allowed us to do some things we just couldn't have done 
otherwise, because we could not take the risk. These were 
savings we were trying to achieve. You do run the risk over 
time of maybe over-paying for something, if a contractor does 
it.
    But I think there are some places where that is usable, but 
as you say, there are some places where it would be wrongly 
used. That's why there's a huge training component in this.
    I guess the philosophical difference we have here is, do 
you trust your procurement officers to make these decisions, 
the guy in the agency buying for the agency, that Federal 
employee who is out there trying to do the best for their 
agencies, do we want to give them all the tools they need to 
save that agency money, or do we want to prescribe rules and 
regulations that certainly stop them from abusing it, but also 
stop them from doing some other good things for that agency in 
the meantime?
    And listen, there has been a tendency, if you go back 150 
years in Government contracts, to over-regulating and under-
regulating. We never seem to get the right balance.
    So I think your testimony is helpful. There should always 
be a cautionary note. There is no question that if you send 
contracting officers out there without the right training, 
without the right guidance, even if you give them additional 
tools, there are going to be abuses going on. People are human, 
they make mistakes. You have a buddy system, all these kinds of 
things.
    And yet if you put too many restrictions on what they do, 
they can't get the job done. Finding that balance is important, 
and I hope you'll be a part of that dialog as we move through 
trying to get it. I'm not sure what it is. Please comment.
    Professor Tiefer. Mr. Chairman, I doubt if I had put a 
proposal on the table and had said about it a bunch of 
criticisms that I could have achieved the philosophical 
expression that you just said. That's all I would say.
    Mr. Davis. I appreciate you, and I'm glad you're here.
    Mr. Wagner, if you were to eliminate the need for the 
Service Contract Act, to be flowed down to commercial 
subcontracts of covered primes, how are we to be certain that 
the service class of employees are not being taken advantage of 
in the areas of wages and benefits?
    Mr. Wagner. I don't think you can. And I think it would be 
a bad idea, quite frankly. I think it can become, it's the 
great equalizer, if you will, to make sure that workers and 
payments aren't being abused, and that you don't have 
contractors diving to the bottom, if you will, on the backs of 
their subcontractors.
    Mr. Davis. OK. Dr. DiPentima, let me ask you, can you 
comment on the impact of the Trade Agreements Act on the IT 
community? Are IT companies forced to manufacture the same 
items in separate facilities because of the TAA?
    Mr. DiPentima. I think it's both ITAA's position as well as 
my own that really has to be looked at. When you look at the 
complexity of some of these products nowadays, not only IT, 
look at the automobile industry as an example. I think that 
really has to be looked at. I think we're limiting ourselves 
too much. I think your proposed bill has the right slant, the 
right view on how you should be examining it.
    Mr. Davis. OK. For Mr. Wagner and Dr. DiPentima, would both 
of you comment on training within your companies? How do you 
keep your own employees current on the latest business 
practices, the latest technology, and how do you measure the 
effectiveness of that training?
    Mr. Wagner. We do this, do facilities support in a 
commercial marketplace as well. We're constantly learning from 
the other side of our business, trading employees back and 
forth, bringing those best practices. We have a data base of 
those best practices that we share among our project managers. 
Because there's always new and good ideas out there.
    I think a lot of this is sharing of the information and the 
ways to do this. One of the problems I think we find, and 
problems in the Government, is we're trying to recreate the 
wheel all the time. I don't think we do as good a job of 
sharing good processes as much as we could.
    Mr. DiPentima. Mr. Chairman, we see training as a strategic 
investment for us, quite frankly. We like to believe we live on 
sort of the higher end of the food chain. We like to find 
complex problems and solve them. And you can only do that if 
you have very well trained people. We spend a substantial 
amount of our indirect funds on training people. Every person 
has a training plan. We try to have three or four training 
experiences for each person a year.
    Not all of it is just in time training. We run our own 
internal SRA university in which our employees help train 
themselves. We have a wide variety of training videos, CDs, 
training labs and the rest. We put a lot of energy and a lot of 
our money into training our folks. I might add, unlike the days 
when you're on a large CICS COBOL mainframe systems where you 
could train someone and maybe get 2 or 3 years out of that 
training, you're lucky if you get 90 days out of some of the 
training nowadays on the newest packages and the newest tools.
    Mr. Davis. OK, thank you.
    Professor Tiefer, let me just ask you, let me anticipate 
your reaction. Training is a very important component, but you 
still need a policeman, even if you train these contracting 
officers, to look over and check them, is that right?
    Professor Tiefer. Actually I wanted to say, as someone 
who's in the business, as a professor of training people, I 
couldn't agree--training in Government contracting, which is 
what you're talking about. I did want to ascertain whether some 
of that money could be spent in law schools for training. As 
long as it's so, I'm a strong supporter of it. [Laughter.]
    Mr. Davis. I don't know how to react to that. They seem to 
have done a good job of training you, that's all I can say.
    I think it needs to be there across the board. Government 
contracts is not probably one of your most sought after areas 
in law school, is it?
    Professor Tiefer. I've seen many people running in the 
opposite direction.
    Mr. Davis. I never took a Government contracting course in 
law school. I went to the University of Virginia Law School. 
And yet I became general counsel for a billion dollar company, 
PRC. I wish I had taken it, it should be basic to 
understanding. Hindsight.
    Mr. Soloway, can you further address the need for us to 
revisit the intellectual property law in order to improve 
Government access to the commercial marketplace? And why do you 
think it's appropriate, assuming that's it, why do you think 
it's appropriate to revisit IT issues legislatively?
    Mr. Soloway. I think intellectual property, Mr. Chairman, 
is one of those issues that falls into a broad category of 
technology challenges and technology issues that serve as 
primary inhibitors to a lot of the technology based from 
engaging with the Government. Let me just share a couple of 
examples with you.
    If you go out and talk to the commercial technology base, 
particularly in the information technology arena, you'll find 
that a very large percentage of those companies will not do 
business with the Government, particularly in research and 
development and developmental areas, where they're not dealing 
with finished commercial capabilities. The principal reason 
they give is the risk of their intellectual property, which is 
the greatest capital that they have in their companies.
    So what they have found in the history of Government, in 
the old days when Government was the principal owner and 
progenitor of technology, there was a practice of, the 
Government owned and controlled most of the intellectual 
property. Today when exactly the reverse situation exists where 
you have probably three quarters of the research and 
development in this country being done in the commercial 
sector, the Government is no longer the owner nor the principal 
customer for a lot of that intellectual capability, that 
technology. I think it requires us to re-look at the cultural 
and other practices that have been driving Government 
procurement in this area for a long time.
    Mr. Davis. All right. Mr. Mather, I'll start with you on 
this, but it's for everybody.
    How are the interests of Government protected if the 
definition for commercial services is expanded? Are there other 
mechanisms to assure that Federal agencies can exercise an 
appropriate degree of oversight? Any thought on that?
    Mr. Mather. Yes, I think the definition of the commercial 
items, though, it goes really to which section of the FAR 
you're going to use. I mean, it literally just says, am I going 
to use Part 15, full and open competition, or am I going to use 
Part 12 with commercial items. Honestly, from a contracting 
officer perspective, which I was in the Air Force for 19 years, 
it really doesn't make that much difference to me. I can use 
the Part 12 procedures which give me commercial terms and 
conditions. I have the commercial changes clause, I have the 
commercial disputes and default.
    The procedures are basically the same after that, though. 
I'm looking for competition. I'm looking to structure the 
acquisition in such a way that I can maximize the value. So 
while the definition will allow those folks that have read very 
carefully, you know, a lot of agencies are not making this 
distinction between labor hours and commercial items, those 
that do are going to the other sections of the FAR and applying 
those.
    This will allow more agencies to use Part 12 commercial 
procedures, which will simplify with the commercial items.
    Mr. Davis. And frankly, most contracting officers try to 
find competition because it covers them, right?
    Mr. Mather. Absolutely.
    Mr. Davis. And that's just the nature, that you want to be 
covered.
    Mr. Mather. Exactly.
    Mr. Davis. And yet, at the same time, there's a buddy 
system sometime, particularly if somebody's been reliable 10 
times straight and has delivered for you, that you'd kind of 
like to nudge it their way. We get concerned, or I hear 
concerns sometimes on the schedules that you get on the 
scheduler or you get it on the GWACs, but then after that, 
you're not getting the competition after that, and that has 
been a concern that's been raised here. I'd like for anybody 
that would like to comment on that to do so.
    Mr. Soloway. Mr. Chairman, before we do that, I'd like to 
go back to Mr. Mather's point for a second. I think the other 
point on commercial services that's important to remember is 
that internal to the Government, it's important for the 
contracting work force to understand the authorities that are 
available to them. But Part 12 requires competition. It's not 
like using Part 12 you can escape competition. That's one of 
the prerequisites.
    Mr. Davis. Right.
    Mr. Soloway. But it's also important to the outside world, 
as we try to access more commercial capabilities, that they 
have a clear understanding of what the rules of engagement are 
going to be, and the way in which those rules are, to the 
maximum extent possible, concurrent with best commercial 
practice, while still protecting the Government's equities.
    I'll give you one quick example. When I was at DOD, I had a 
company, a very large company, come to see me. Their commercial 
division had decided to stop selling commercial products to 
DOD. This is under Part 12. The reason was an invoice which 
they said was one in a series they had submitted, I'm sorry, 
from the Government, where the Government had handed them a 
requirement for a commercial product under Part 12 to which 
they had added 15 contract clauses, several of which were 
statutorily prohibited under Part 12. All for an invoice worth 
about 59 cents.
    So this company's general counsel----
    Mr. Davis. That's a lot more than the penny.
    Mr. Soloway. Yes, it's a little bit more than the penny 
that Rene talked about. But someone in your position can 
understand the general counsels in this company said, this is 
just not worth it. It's putting us at certain risks and so 
forth. So I think clarifying all of these pieces is very 
important. The defense authorization last year gave much 
broader authority to DOD to define commercial services in a 
performance based environment and so forth. But we still have 
this need, I think, both for internal and external consumption 
and understanding, to clarify exactly what we're talking about.
    Mr. DiPentima. On your competition question, I actually see 
it opposite to that. We do a lot of work on the GWACS and IIQs 
and the rest. The fact of the matter is, the pressure is on me 
constantly to perform, not only because of the past performance 
provisions, but when you take a contract like CIOSP, with 
dozens of prime contractors and hundreds of subs, if I don't 
perform, there's no reason to come back to me on the next task 
order. They have such a large number of other companies and 
subs that they can select from.
    So I think I feel I'm always in competition and always 
incentivized to do a good job. Because in fact, it is easy to 
replace me if in fact I'm not delivering what the Government 
needs.
    Mr. Soloway. And if you look at the statistics from the 
Federal procurement data system, in IT, 91 percent of all 
actions are competitively awarded. That's a pretty high 
percentage.
    Mr. Davis. OK. Professor Tiefer, I think you suggested that 
one of the critical differences between the products and 
services market is the products market tends to be more 
competitive. And that one is more appropriate for the kinds of 
reforms we've made in recent years. Is that fair to say?
    Professor Tiefer. That's correct.
    Mr. Davis. Let me just ask some more of the reps, would 
they agree with that?
    Mr. Soloway. Statistically speaking, it's factually 
incorrect from a Government perspective. As I just said, if you 
look at the Federal procurement data system for fiscal year 
2000, you find that the procurement of services is more 
competitive than the procurement of products by the Government. 
Something like 91 percent of information technology services 
are competitively procured, 80 some odd percent of total 
services are competitively procured. I believe, I don't have 
the figure with me, that something under 60 percent of products 
are competitive.
    So I think in the Government market it actually is exactly 
the reverse.
    Mr. Wagner. And in our arena, with base operation support 
contracting, I can tell you, it's extremely competitive out 
there. There are a number of contractors out there that are 
making this marketplace very competitive and very tough to be 
in.
    Mr. DiPentima. Mr. Davis, I would say that there is one 
instance in which it might be interpreted as a lack of 
competition. But if I look at a competition coming out, let's 
say, on a GWAC, and I know that there's a particular company 
that has done excellent work, high customer satisfaction and 
has been doing a good job for that, that's not where I'm going 
to invest my B&P money. I'm not going to foolishly spend a lot 
of money to try to unseat someone who is in fact doing a very 
fine job for the Government.
    Now, if other people feel like me and we don't particularly 
bid that task order, you could be perceived as being non-
competitive, when in fact, it's the whole decision that was 
competitive and we decided not to compete on that.
    Mr. Davis. That's not like the business that Mr. Turner and 
I were in, where if you're doing a fine job for the Government 
people still try to unseat you. [Laughter.]
    But that's a different business altogether.
    Osborn and Gaber, in their book, Reinventing Government, 
which is now a decade old, but was a good primer at the time, I 
know that Vice President Gore brought Osborn in to help him in 
the reinventing Government, make an observation about 
Government being mission driven versus regulation driven. In 
point of fact, you come to the point sometimes where you have 
so many regulations you can't get the job done.
    One of the examples they used was Mayor Guiliani in New 
York, when he was first elected. He'd go into these 
neighborhoods. The one request he got uniformly as went across 
the city was for stop signs in neighborhoods, to stop the cut-
through traffic, the kids were out there, the school buses, or 
playing ball.
    So he'd go, oh, yeah, I'll take care of it. He'd go back to 
city hall, they'd put a memo out, they'd send it to their 
traffic people who would do the appropriate counts, they would 
weigh this against the international engineering standards for 
signage. He'd go back 6 months later and they'd say, Rudy, what 
happened to that stop sign? We never got the stop sign.
    If you go through the regulations, you'd never get the stop 
sign. Anybody who's in local government knows, you'd just never 
get it. Because the purpose of the regulations is to move 
traffic.
    So what Guiliani did is, he learned. He went out to these 
neighborhoods and he would always have a trunk full of stop 
signs with him in the back. And they'd go up and weigh it, and 
he'd just take it out and write the permit and give it to them. 
[Laughter.]
    Now, I don't think we want to take Government so it's that 
mission driven, or you'd never be able to move traffic. There 
are reasons. But it's finding, as we said before, what's the 
right balance. And we have had a lot of acquisition reform over 
the last decade. It has been to some extent bipartisan. You had 
President Clinton and the administration working with, for the 
most part, Republicans in Congress, and some Democrats, working 
to get these in there. We are trying to digest, I think they 
brought a lot of efficiencies.
    I know for one thing they had fewer bid protests. Excuse 
me, but any time you keep the lawyers out of it, that's 
efficiency in my opinion.
    So traditionally, you don't do procurement more than once a 
decade, at most. And here we are trying to followup. But the 
services side is an area in my opinion where we see more and 
more buying going in there. And as a result, I think sometimes 
more and more waste without the right oversight and without the 
right tools for our contracting officers to be able to get out 
there and get the best products, the best value if you can.
    So I think we need to revisit this. I think we need to make 
some changes. We heard from the previous panel they're not sure 
how much should be legislative and how much should be directed 
from the inside, and we're going to work with the 
administration to do that.
    But I also think we need to keep in mind what Professor 
Tiefer was saying, and that is, you can go overboard on some of 
this stuff. Without the appropriate oversight sometimes, the 
law of unintended consequences kicks in. We'll try to figure it 
out.
    All your testimony has been very helpful, I think, in 
building the record for this, and we look forward to hearing 
further comments you want to make as we move through this 
process.
    I'm going to now turn it over to Mr. Turner for any 
questions he has.
    Mr. Turner. Well, this has been an interesting panel. It 
does bring to mind a lot of issues that obviously we are going 
to have to deal with in trying to put together a reform 
package.
    I think as the chairman mentioned, there are so many 
differences in contracting in the private sector versus 
Government contracting that we have to keep in mind that it 
makes it a very difficult area to work our way through. 
Inevitably, I think the standards of accountability that we are 
obligated to carry out in Government vary and differ from the 
private sector. We are concerned not only about cost and 
profit, but we are concerned with public safety and other 
issues that really represent the fulfillment of the public 
trust that those of us who serve in elected office and those 
who are appointed and service as acquisition officers have to 
carry out, which is a somewhat higher standard than perhaps is 
required of a business executive in trying to structure a deal 
or make a profit.
    Also I guess it's true that a lot of public policy 
considerations enter into the contracting process, things that 
collectively we agree should be considerations that may have 
absolutely no relevance if you're in the private sector.
    I was interested, Dr. Tiefer, you cited for us two articles 
that you commended us to take a look at. I wish you would maybe 
just give us a little sense of what those articles are all 
about. One of them I believe was an American University law 
review. It was one, I believe, entitled, ``Fear of Oversight, 
the Fundamental Failure of Business-Like Government.'' And then 
the other one you mentioned was the Project on Government 
Oversight, ``Defense Waste and Fraud Camouflaged as Reinventing 
Government'' article.
    Share with us a little bit about what we would learn if we 
were to have the time to review those two articles.
    Professor Tiefer. I'm holding up a copy of Professor 
Schooner's article on ``Fear of Oversight, the Fundamental 
Failure of Business-Like Government.'' Professor Schooner, this 
is something of a magnum opus for him. He did numerical studies 
showing a number of areas, one of which is the decline in the 
number of protests.
    He has seen that the result of FASA and FARA and 
reinventing Government, things which he believes show a decline 
in competition and by the decline in protest disputes and 
things like that, a decline in the oversight, in the 
enforcement of public policy goals that are achieved through 
procurement law. It's a strong thesis. He's the co-director of 
the Government law program at George Washington Law School, 
which is in some ways the most distinguished Government 
contracting law program in the country.
    So there's a great deal of attention being given to his 
thesis. And it calls for caution in going a lot further a lot 
faster in the same acquisition reform direction. He's not 
totally against going anywhere, he just says caution.
    The other study, which I wont' talk about at length, the 
project on Government oversight pointed out a number of, 
actually it mostly picked up a number of General Accounting 
Office studies, inspector general studies which has shown that 
there's been in certain areas less competition. Some of the 
other abuses that we fear in Government contracting. I think 
the project on Government oversight actually submitted written 
testimony for today's hearing.
    Mr. Davis. It's in the record.
    Mr. Soloway. Mr. Turner, if it would be all right with you 
and then the chairman, what I would like to offer is to take 
Professor Schooner's article and the POGO report and submit 
some comments for the record. And I've read Professor 
Schooner's article and engaged in extensive discussion with him 
about it, and frankly find the thesis less tenable perhaps than 
my colleague, Dr. Tiefer.
    But what I'd like to do, if it's OK with you, for the 
record, is submit some comments on both Professor Schooner's 
article and the POGO report, which unfortunately also had some 
errors of fact and so forth and perhaps some misconceptions as 
to what's really going on, from my time at the Department of 
Defense.
    Mr. Davis. Certainly. That would be fine.
    Do you have the article with you? I can read it on the 
plane tomorrow. I'd be happy to read it.
    Professor Tiefer. I will submit it for the chairman's 
reading.
    Mr. Davis. That would be great. I will read it. Thank you 
very much.
    Do you have any more questions?
    Mr. Turner. That's all. Thank you.
    Mr. Davis. Well, we have a vote on, so this is a good time 
to conclude. Let me thank all of you for your input into the 
process. We look forward to working with you. We're going to 
keep the record open for 2 weeks, if you want to do anything to 
supplement what you said, any other ideas. We have other 
testimony that groups have submitted that will be made part of 
the record and that we will address as we move through.
    I want to thank everybody for attending the subcommittee's 
important oversight hearing today. I want to thank the 
witnesses, I want to thank Representative Turner and the staff 
for helping to put this together. I think it's been a 
productive hearing and the proceedings are closed. Thank you.
    [Whereupon, at 5:35 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional information submitted for the hearing record 
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