Department of Agriculture

Replace sole-source contracting with open market purchasing

Summary:

 

Allow purchases to be made on the open market, with the purchasing decisions made close to the end users of the products and services, but provide services that empower purchasers to make better purchasing decisions.

 

Immediate Actions:

 

Eliminate mandates to use contracted products and services. Allow government purchasing agents to buy on the open market as easily as they can through government contracts. Let the free market determine which is best. Allow end users to determine which product or service best fits their individual circumstances (e.g., non-refundable open market airfares vs fully-refundable contract fares; there are circumstances in which each are better, but only the traveler and immediate supervisor will typically know which fits a particular trip). Allow travelers to choose their own travel agent or book flights online.

 

Longer Term Actions:

 

Discontinue contracting activities that are proven ineffective when faced with competition from the open market (i.e., contracts that lose market share to the open market).

 

Reassign the employees that service the discontinued contracts to provide purchasing decision support services. For example, one small group of employees might specialize in evaluating automobiles: they would collaborate with a select group of motor pool managers to evaluate car models for durability, repair costs, and fuel consumption under actual in-service conditions. Other employees would specialize in other groups of products or vendors. They would be available to consult with government purchasing agents, but the information they collect would also be made available to the general public on a website.

 

Potential Benefits:

 

Reduced cost of government purchases (could be billions of dollars).

 

Government purchases meet needs of end users more effectively.

 

Cost savings to the government and the private sector through less time spent negotiating contracts.

 

Eliminates the substantial cost to our economy of vendors having to maintain two distinct sets of marketing infrastructure (web sites, sales staff, etc.), one to serve government and another to serve everyone else.

 

Greater opportunity for small and newly established businesses to sell to the government.

 

Having the government (a significant fraction of all purchasing in our economy) more fully engaged in free market purchasing will improve the competitiveness (and hence the efficiency) of our entire economy.

 

Provides decision support services to make future purchasing decisions more effective than is possible (due to lack of necessary information) in the open market today. Direct support would be provided to government purchasers, but all information would be available to the general public through a website. This would result in a further improvement (beyond the immediate one described above) in effectiveness of government purchases and in the efficiency of our entire economy. This benefit will likely eventually exceed that of all the other points combined.

 

Justification:

 

The government purchases many products and services through huge contracts with pre-agreed prices and specifications and then mandates that government purchasers use these contracts (or at least makes it much more difficult to purchase on the open market). In many cases (e.g., airfares, travel agent services, etc.), the prices are often much higher than on the open market and the specifications do not meet the needs of government customers. This causes wasteful spending, frustration of employees, and considerable lost time spent negotiating these contracts on the part of both the government and potential vendors. These allegations are supported by an enormous number of excellent suggestions contributed to this forum.

 

This anti-competitive activity is disruptive to our free market economy, which is supposed to be based on many customers making well-informed, but independent decisions between alternative vendors and products. Furthermore, the burden of preparing large bid packages for government contracts adds considerable cost to the economy and unnecessarily takes many small and newly established businesses out of contention for doing business with the government.

 

Free-market economies work to the extent that buyers and sellers have full knowledge of the products and services they are exchanging. One of the fundamental problems in our current economy is that most of the products and services in it are too complicated for buyers to effectively determine and compare their value in a reasonable amount of time. The best example of this dilemma is probably health insurance: almost no one is qualified to compare several alternative policies and determine accurately which is the best buy for themselves (and we all know how efficient that sector of our economy is). Other examples include automobiles and computers (what are the life-cycle cost and environmental impact?); their values are determined by factors such as durability, estimated costs of repairs and upgrades, likelihood of being compatible with future technology, and other factors that are very difficult for an individual purchaser to determine.

 

Alternatives for Displaced Employees

 

As contracting activities are reduced, some employees responsible for that contracting will be displaced. To the extent possible, when attrition causes vacancies in other contracting positions, those positions should be filled with employees displaced from discontinued contracting, so that the displaced employees’ skills are utilized and there is no need for training new employees to perform the contracting duties. To the extent this is possible, it will reduce the total number of government employees and hence produce direct cost savings.

 

However, many other displaced contracting employees should be reassigned to the decision support service. The nature of the work, combined with today’s communication technologies, would seem to make it possible for many of these employees to work from any location. To the extent possible, these employees could work from their current offices, although their reporting structure would likely change.

 

Empowering Employees and Accountability:

 

This suggestions implicitly requires a shift in government culture away from the command and control approach embodied by mandating the use of huge government contracts decided on by a few and toward a culture of empowering many more front line employees to make decisions based on specific circumstances that they are much better informed about. This is completely consistent with modern management philosophy which emphasizing empowering employees.

 

The suggestion also provides a new support network to help these front line employees make better decisions than would be possible today.

 

Nonetheless, it is inevitable that some bad decisions will be made as a result of transferring responsibility to more employees. However, it seems very likely that the bad decisions will be far outweighed by many other great decisions.

 

The New Decision Support Service:

 

It would focus on supporting products and services for which appropriate decision support is not currently available. For example, it might focus on the durability and cost of ownership of automobiles, but not on their features and amenities (because the latter are already extensively reviewed in the private sector). It would not focus on helping travelers find a flight that meets their needs, because that service is already provided by web sites and private travel agents.

 

It would focus on summarizing information that is difficult to obtain otherwise on products and services that are purchased in large quantities by the government. This may be done to a large extent by surveying or collecting data from actual government users of the products and services.

 

Another, distinct aspect of the service would be evaluation of vendors. When selling exactly the same product, which vendor provides the best price and service? This would be extremely beneficial for purchasing inexpensive items, for which it is not a good use of time to shop around for each purchase, but it is useful to know which vendors to use and which to avoid.

 

Conclusions:

 

Mandates to purchase through huge government contracts are often ineffective. Allowing direct competition with the open market would provide a direct way to evaluate which of those contracts are effective and which are not. Those that are not effective should be discontinued. Displaced employees could be transferred to a decision support role to help front line employees make purchases that are more appropriate to their specific needs than the huge contracts allow for.

 

These changes would result in immediate, direct cost savings to the government and to longer term improvements in the efficiency of our entire economy.

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Idea No. 13543