The Wall Street Journal on Saturday had a front page article on the White House initiative to create a new agency to manage large IT projects and increase federal hiring of key IT specialists from industry. The White House has stated this is in response to the failure of the Healthcare.gov rollout.
As someone who has provided IT services to the government (cybersecurity, software development, project managers) for over 12 years, I think this is a step in the right direction, but it misses some of the key reasons for the failure of the Healthcare.gov site and some of the blind spots in the current IT procurement process.
The problems noted by the White House are by no means new. Dr. Marv Langston, former Department of Defense Chief Information Officer (CIO) noted these and other problems with the federal process for acquiring IT systems in his blog, here.
Congressman Darrell Issa (R CA-49), the Chairman of the House Oversight and Government Reform Committee, sponsored bill HR 1232, the Federal Information Technology Acquisition Reform Act, with similar goals, reform the way in which the federal government procures information technology systems.
The problems the White House has noted in the Wall Street Journal Article without doubt exist. These include the lack of internal expertise within some federal agencies to manage large IT projects, the extended hiring process to hire federal workers, and lack of a single concentrated government entity that manages IT projects. In addition, the following issues compound the problem:
A contract selection process based upon the military industrial complex vs. innovation and fixed prices. As a defense contractor, I find the term “military industrial complex” most often used by former (or current) hippies who believe that if the U.S. eliminated their military all the other world powers would follow our example and we’d join arms across the world and sing “Cumbaya”. In this context, I use the term to describe an acquisition process which has been developed with huge influence from behemoth defense contractors with the aim of steering the huge bulk of federal money right back to…you guessed it! To even bid on federal government work requires an infrastructure that would make most small business owners cringe, and the cost of dealing with the federal government compliance requirements drives up the price of services and goods well over what would normally be a market rate.
The prevalent use of “cost plus” contracts. Cost Plus contracts are used by the government to procure services or products that are too difficult to properly scope. The government agrees to cover all of the contractor’s costs, and the contractor agrees to take a much lower profit (sometimes below 5%) in order to get the work. Unfortunately, the use of these contracts has become more prevalent for several reasons. First, is there is very little scoping requirement on the part of the government, they just pay the legitimate costs of the contractor. Second, the idea of limiting contractors’ profit, or “fee” appeals to a large number of federal employees who chafe at the idea of contractors making “too much money.” Unfortunately, the net effect of these contracts is apparent to any high school economics student: contractors continue to inflate their costs and the taxpayer pays far more than they should for the final product. In addition, the contracts become viewed as a jobs program for contract employees (many of whom are retired federal or military personnel) rather than an efficient means of procuring services using taxpayer money. I have seen hundreds and hundreds of IT contracts that are scoped not by the deliverables, but by the number of people that will be employed on the contract. Can you imagine Microsoft outsourcing a large software project by stating that they needed “25 software developers for a five year period”?
Delegation to local officials who based awards upon local preferences vs the actual company’s capability. “All government work is local.” I have heard this quote many times over the years, and it is true. Whatever state or region is assigned a specific acquisition project, the locally based federal officials are likely to give some sort of preference, overt or subtle, to local contractors or those with a strong local presence. This is not a symptom of corruption necessarily, but it is human nature to trust those whom one knows. Unfortunately, this can lead to skewed acquisitions that may exclude highly qualified companies that can’t afford to have an office in Littletown, Middle America.
A procurement process that is often delayed by months or years. Many federal procurements take 18-24 months. Even with those large timeframes procurements can often be delayed another 12-18 months beyond the due date, with an end result of a system that was scoped 3-4 years prior finally being awarded. With technology cycles being what they are, the original procurement sometimes may not even be require any longer, or might have been supplanted by another technology.
A broken Small Business Innovation Research (SBIR) process . This federal program started as a great idea, setting aside small (100K-$1M) research projects for small companies with easier an acquisition process to generate innovative ideas from something other than the typical huge defense behemoths. Unfortunately, however, the program suffers from very low conversion rates from successful research projects to programs, partially because of the need for better integration with programs that it is supposed to benefit. As stated, these programs might have been in procurement and in development for close to, or over, a decade and even if a SBIR program comes up with an innovation that could be useful, the ability to change the program to incorporate that innovation is highly limited, if not impossible without re-procuring the entire system.
Before trying to invent a new solution to something people familiar with the problem have been aware of for years, the White House should look carefully at Issa’s HR 1232 bill, it likely addresses most of the issues that cropped up with the ACA Healthcare exchanges. It would have been good if someone from the White House had looked at it earlier, before attempting such a massive IT project without any assurances that it would simply “go” using the same old broken procurement systems.