Out of Control Policy Blog

Engaging the Private Sector on Government Procurement

Privatization isn't as simple as government just signing a contract. It requires thought and diligence every step of the way, particularly at the formative concept-to-procurement stage.

But this stage is tricky and presents a Catch-22 of sorts. At the same time that public administrators should be asking for upfront advice from the private sector to determine how best to design a Request for Proposals to maximize value for money, efficiency and service quality for a given project, many procurement officials and administrators are leery of communicating with private firms that may ultimately end up competing for a contract.

However, without a good sense of how things work in the private sector, procurement officials take the risk that they introduce a flawed design right off the bat in a procurement process. For example, they may fail to properly communicate expectations regarding risk allocation, performance levels or costs, or they might stifle innovation by requiring contractors to deliver services using the same methods and business practices the public sector had. These sorts of "design problems" are common procurement challenges, and any number of missteps like these can hamstring a procurement (or a resulting contract) from the start.

Harvard University Kennedy School professor and former Office of Federal Procurement Policy administration Steve Kelman notes this problem in this excellent Washington Technology article and concludes that effective communication between government and the private sector can save money and prevent misunderstandings and missteps:

Back in 1993 when I attended my first Executive Leadership Conference sponsored by the Industry Advisory Council, the theme was the plaintive question "Can We Talk?" In those dreary days, the accepted wisdom was that informal communication between government and contractors before a request for proposals was issued was dangerous, fraught with risks of favoritism and suitable only in highly regulated meetings contractors attended en masse for the opportunity to ask questions, which nobody ever did for fear of revealing information competitors could use.

During the 1990s, the dominant view changed. An important reason to work with contractors in the first place is the fact that they have knowledge the government doesn't. When government doesn't take advantage of that knowledge before issuing an RFP, it loses. Failure to get early, honest feedback results in many misunderstandings in contract language, which bedevil contracts after they are signed and lead to disappointments or even litigation. In addition, lack of pre-RFP communication often leads to requirements that are unnecessarily expensive to meet but could have been made more economical with small changes.

A recent article in Contract Management, which is published by the National Contract Management Association for professionals in government and industry who are involved in contracting, noted that some agencies' legal or ethics officials have "concluded that contracting personnel in their agency or office should err on the side of caution and not be an active participant in NCMA activities." That attitude reflects a return to the older, dysfunctional view of government/industry communications. [...]

[...] Indeed, we should take government/industry communications to the next level. In my view, that means giving evaluation credit to bidders who have proposed pre-RFP improvements in agency requirements that will save the government money or reduce misunderstandings about what the government requires.

Let's use government/industry communication for the benefit of agency missions and taxpayers.

I couldn't agree more. The more communication upfront, the better each side will understand the other, and the stronger any eventual contract. This is exactly the sort of thinking that can help public officials bridge an important "procurement gap" and foster smarter and more effective government contracting.

Leonard Gilroy is Director of Government Reform


« New Deloitte Reports on Infrastructure… | Main | Fed Bumps Discount Rate! »




Out of Control Policy Archives