Responses to Senate Finance Committee Questions on IT Modernization
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1 Chairman Orrin Hatch United States Senate Committee on Finance Response to Chairman Hatch s Request for Further Information on IT Modernization November 2, 2016 Chairman Hatch, Thank you for the opportunity to submit comments to the Senate Finance Committee. Please accept the below comments and recommendation on behalf of Grant Thornton Public Sector, a management consulting firm specializing in helping governments enhance their acquisition, financial, human capital, information technology, data analytics, and performance management. Grant Thornton Public Sector helps executives and managers at all levels of government maximize their performance and efficiency in the face of ever tightening budgets and increased demand for services. We have structured our response in each of the seven questions you posted in your original request. In addition, we have included three additional pieces of our research and thought leadership in this area we thought would be particularly useful in your continuing efforts to gather more information about current IT modernization and acquisition practices. The first is our most recent Federal Acquisition Executive survey where we conducted extensive interviews at all levels of the federal acquisition workforce. The second and third outline our approach to implement agile acquisitions at government agencies. We are eager to follow up on any of these responses or answer additional questions you might have on this topic or any broader acquisition or government management topics. Thanks again for the opportunity to share our views and expertise with you. Point of Contact Adam Hughes Director of Marketing and Government Affairs Grant Thornton Public Sector adam.hughes@us.gt.com Responses to Senate Finance Committee Questions on IT Modernization 1. Do you believe that federal agencies are conducting market research in accordance with the FAR Part 10? Are they effectively identifying commercial items or non-developmental products that meet the agency s needs? If not, what change do you believe need to be made to improve how agencies conduct market research? We believe agencies are conducting market research in accordance with FAR Part 10. However, we have found that research effectiveness is compromised when inquiries are based on complex and 1
2 prescriptive requirements and lengthy, non-iterative development methods. Therefore, while the research is being done, it is flawed. In particular, it reduces the likelihood of program and mission success by undermining government s ability to identify viable commercial or non-developmental items. System architecture is an effective mechanism for transitioning from monolithic, risky IT solutions to a smaller, less risky, highly cohesive, and loosely coupled set of integrated products. Likewise, market research will prove more effective for identifying viable commercial items or non-developmental products when government focuses research efforts on solution components, and not on single, uber-complex, and mission-unique monolithic solutions. 2. Are you aware of any acquisitions in which agencies, either intentionally or unintentionally, exclude proposals that offer commercial and non-developmental product companies from consideration for IT contracts? If so, please describe how this was done in as much detail as possible. We are not aware of any specific examples where agencies excluded proposals that offer commercial and/or non-developmental produce companies from consideration for IT contracts. 3. What parts of the FAR are not being fully utilized or could be better utilized by federal agencies that would allow for a wider range of companies, such as commercial or non-developmental ones to successfully bid for IT projects? For examples, we are interested in your views and recommendations for how the scope of competition for federal IT contracts could be broadened by: a. Increased use of commercial contracting procedures (FAR Part 12) b. Greater use of fixed-price contracts (FAR Part 12) c. Changes to evaluation criteria and source selection factors in solicitations (FAR Part 15) Federal agencies could better utilize other parts of the FAR in order to successfully accomplish more effective IT acquisitions. Specifically, FAR Part 39, Modular Contracting can increase the overall value to the government by reducing investment risk, deliver capabilities and minimally viable products more quickly, and allow for adoption of new and emerging technologies including commercially available products more easily. Embracing this approach would also help agencies steer away from the holistic, grand-design requirements practices. Through FAR Part 39 agencies can determine which parts of systems or products could be solved by commercial or non-developmental products and better integrate those products using an Agile methodology. This technique garners additional attention in the executive branch after OMB released guidance on implementing modular contracting in Despite this guidance, there still has been too little progress in the acquisition community in shifting the structure of procurements particularly for large IT acquisitions. 1 OMB Memo and Accompanying Guidance: Contracting Guidance to Support Modular Development. June 14, Memo: 2
3 Agencies use FAR Part 12, Contracting for Commercial Items, when the requirements and market research indicate that products or systems can be satisfied by commercial items. This situation could be remedied by exploring concepts described in government wide guidance and resources such as the TechFAR and Digital Services Playbook. a. We believe agencies use fixed price contracts sufficiently. Even for large systems development efforts, agencies are usually successful in finding a contractor or contractors to bid and perform the work on a fixed price basis. Most experienced contractors have sufficient expertise and experience with IT systems development and integration that they are comfortable performing the work on a fixed price basis. b. An opportunity exists for agencies to encourage contractors to use and incorporate commercial/non-developmental solutions into their technical approach by using evaluation factors to encourage this behavior. Agencies could incorporate more effective technical evaluation factors to encourage use of commercial or non-developmental solutions as individual parts within their broader approach. For example, an agency could add an evaluation sub-factor where contractors are given preference or higher ratings by incorporating commercial and/or non-developmental products into their overall solution. 4. What are the barriers to commercial and non-developmental products being utilized to their fullest potential within the federal government? Monolithic architectures and solution definitions are the primary barrier to commercial and nondevelopmental product use. It is often the case that coverage for all requirements and needs associated with a comprehensive, large-scale, complex, uncertain, and mission-unique solutions cannot be achieved with commercial and non-developmental products. The government must use architecture to organize IT efforts around smaller, simpler, less uncertain components that align with viable commercial and non-developmental products. In doing so, government will improve success likelihood, deliver value faster, reduce work-in-process, and shorten cycle times. In short, the government will end up with a better product or service. Please see answer to question #1 to understand how architecture should be used to better identify viable commercial and non-developmental products through market research. 5. How can federal IT contacting be reformed to improve access to IT contracts that commercial or non-developmental product companies may seek? In 2011, the Office of Management and Budget released a Mythbusters memo detailing common misconceptions about the Federal Acquisition Regulations. One of the main pain points identified was communication between procurement officers and companies seeking federal contracts. Agencies Guidance: 3
4 were instructed to create high-level Vendor Communication Plans. These plans seek to eliminate barriers and increase transparency in an attempt to make the contract process friendlier to more companies. Contracting Officers (COs) should also not hesitate to meet face to face with contractors to resolve questions and open a continual dialogue. It is a common myth that this kind of contact is off-limits. Despite efforts by OMB and agency leadership to educate the acquisition community on the importance of communication throughout the acquisition process and enable better dialogue between the government and private sector companies, we have consistently found that lack of communications and collaboration on acquisitions has not been practiced consistently at operational levels throughout the government. In fact, less than half of the acquisition professionals we interviewed in our 2016 acquisition survey said communication and collaboration in government acquisitions had improved in the last two years. According to our survey results, communication between government and the private sector is still widely viewed as inherently risky among the federal acquisition community. The Mythbusters memo also warns that short Request for Proposals (RFP) response times often hamper the number and quality of responses while also crowding out potential contractors who are not well-versed in the federal procurement process. Maybe the biggest key for a better procurement process is a more personalized approach. Another misconception highlighted in the Mythbusting memo is that the best way to reach companies is by the use of direct marketing and mailing lists. In reality these methods amount to clutter that weakens their effectiveness. A better tactic could be the use of in-person outreach sessions that put contracting officers and contracting officer representatives in a place to interact and answer questions about procurements. In our 2016 acquisition survey, many respondents also cited use of a more personalized approach as helping create better outcomes in acquisitions. The use of draft RFPs and open industry days to allow commercial companies to engage with the government acquisition stakeholders were cited as key tools to help with not only information sharing, but also helped to develop empathy between the players. Despite having access to these tools, there is the potential the government utilizes them only as a check the box exercise, not taking advantage of the dialogue with private sector companies or incorporating feedback into final RFPs. Better utilization of the TechFAR, which highlights the flexibilities in the Federal Acquisition Regulation (FAR) that can help agencies understand how to use existing acquisition processes to create contractor support structured through an iterative, customer-driven software development process. In particular, the TechFAR supports the use of Agile development, modular contracting, and proven private sector methodologies for creating iterative and incremental processes were product capabilities are released in close collaboration with stakeholders. And these methodologies need to be applied to both pre-award acquisition steps as well as post-ward. Perhaps one of the most important messages of the TechFAR that it is not designed to usurp existing 4
5 laws or regulations but simply calls out specific sections of the FAR as examples of how to align current government rules with new, more effective IT development techniques. 6. What, if any, additional changes would you recommend to the procurement process, in general, and the terms and conditions of IT solicitations, in particular, to improve competition for, and reduce the cost of, federal IT solutions? IT solicitations need to be transformed from groaning, nonspecific task orders to smaller, more targeted documents that allow contractors to use their expertise in the most effective way possible. Large federal IT projects require a number of skillsets that are many times not well-suited for a single contractor. Increased solicitation precision creates more realistic project goals and allows for companies to apply their skillsets to the most pertinent aspects of the project. The best way to pivot to a more specialized approach is to adapt best practices of Agile Acquisition, and more specifically Modular Architecture. As of now, many Federal IT practices expect project results that stem from a laundry list of frameworks and expectations set forth at the outset of the contract win. This approach ignores realities and creates a chilling effect on continual flexibility that is integral for positive results. Imagine a tree. The current acquisition framework attempts to solve problems from the roots up to the top. This approach oftentimes ignores the complexity of these IT projects and confronts problems in an overly simplistic manner. The result? Over 90% of large IT projects are unsuccessful. This considerably significant failure rate can be fought with the Strangler Pattern, a method of creating new systems around the edges of the old. The ancillary branches of the tree must be transformed until the innovations begin to take hold throughout the trunk and roots. Each module or branch has a specific scope of work and goal that can be narrowly tailored to the expertise of the sought out contractor. Agile acquisition actually benefits from iteration and change because it is driven by constant feedback and communication loops instead of up-front and oftentimes overly complex frameworks. This is called Value Delivery, an approach that allows the government to accurately assess project completion and identify necessary pivots, if needed. Getting to the Value Delivery stage requires newfangled IT solicitations that make this type of flexible work structure possible. Acquisition officers must be empowered to work outside of their normal templates in order to create narrow solicitations with clearly defined project goals. A key to this process is the use of Indefinite Delivery Vehicles (IDVs), which can pre-screen a pool of qualified contractors and their associated pricing points to allow for easy contract matching. The following is taken from an Office of Management and Budget Memo Best Practices guide. The General Services Administration s Central Contracting Office recently sought input on the procurement of the next generation of the agency s enterprise IT services and support. Through RFIs, the agency first sought input on the current challenges and strategic technology initiatives, asking industry how it would recommend the agency approach those challenges. A subsequent RFI was issued to seek more specific input to the draft solicitation. A pre-proposal conference, attended by over 50 vendors, helped to 5
6 further refine agency requirements. Another key action item in amending IT solicitations is appropriate division of work stream capabilities. The government should divide contracts into four categories: (1) Program and Change Management; (2) Product Management, (3) Product Development and (4) Product Delivery. This ensures each work stream is handled by a vendor well-versed in the needs of the specific field. This concept may be the most important in the quest for increased efficiency and higher quality results. The 90 percent failure rate, while influenced by other factors, is a byproduct of inexact solicitations that attempt to pair a single vendor to massive, inflexible projects that often become tangled in red tape and miscommunication. Agile Acquisition, Modular Architecture and IDVs can effectively narrow projects and properly pair contractors to ensure accountability and success on large IT projects. On a more general note, there has still been too little progress in reforming the federal recruitment, hiring, and performance evaluation process for federal employees. In particular, federal employees continue to believe that poor performers are not held accountable and performance pay and promotions are not sufficiently based on performance and value to the organization or agency. Only 29 percent of federal employees agree that steps are taken to deal with a poor performer who cannot or will not improve, according to the latest government wide Employee Viewpoint Survey conducted by the Office of Personnel Management. 2 These facts about the workforce are particularly impactful in the acquisition community, where acquisition executives across the government continue to report in our surveys that they are unable to hire sufficient numbers of professionals with the skill sets to successfully do their jobs. Government leaders anticipate this will only get worse as more experienced federal workers retire and are replaced with insufficiently prepared staff. 7. What should agencies do more of, better, or differently to better ensure that they achieve desired business goals and objectives from their IT projects and contracts? Agencies should refer to the Tech FAR and the Mythbusting memo for a variety of solutions regarding IT project problems. Better end project results depend on following agile best practices from the genesis of the solicitation to the completion of the tasks. If followed correctly, the Tech FAR and Mythbuster solutions can create a ripple effect that positively impacts each phase of procurement. An ideal IT acquisition process would be consist of many small, clearly defined projects that would allow for communication channels between the government and contractor to be consistently open. Although the solicitation process and actual project work are their own distinct spheres with unique challenges, models that transcend work stream can facilitate reaching business goals. Feedback loops at each step means in-person outreach in pre-solicitation, open dialogue during the RFP drafting and constant communication and pivoting during project implementation. Flexibility means adhering to the FAR best practices and creating agile solicitations tailored to their work stream experts, 2 Federal Employee Viewpoint Survey Government Management Report
7 willingness to hear protests and then an openness to amend work plans and project expectations as the work is done. There needs to be a fundamental shift in the way both the government and contractors look at these large IT projects. The current model, which has been proven to be unworkable, resembles a large inanimate object that when defined is treated as static dogma. Projects are living things that are constantly in flux and adapting to the conditions around them. If this is embraced it results in a more realistic work environment that understands large IT projects to be dependent on the people that work on them. The Tech FAR specifically addresses some of the concerns that arise from this type of thinking. 7
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