Although Pentagon purchasing guidelines developed in response to
President Clinton's "reinventing government" program have eliminated
$400 hammers, now $76 screws and other outrageously-priced items have
caused onlookers to question the effectiveness of speed-oriented defense
procurements.
The Clinton administration has been trying to make its military
purchasing system more like corporate America's, where speed and volume
discounts are emphasized and detailed product specifications and cost
analyses are usually scrapped.
The new system directs Department of Defense officials to buy commercial products
whenever possible, bargaining hard for the best price while eliminating
detailed specifications and company cost analyses that in the past drove
up prices.
The 'Hammer Award' |
In the old system, the Pentagon would make contractors divulge and
justify their actual costs for products made to exact specifications.
Now, defense-contracting officials are prevented under the law from
learning a company's costs for producing any product deemed to be
commercially available. Instead of demanding cost analyses, defense
officials simply try to negotiate the best price, buying in bulk.
Dick Dalton, a spokesman for one of the Pentagon's bigger
contractors, Boeing Co., said progress is being
made.
Pentagon contracting officers now frequently browse through the
company's online catalog to see if any of the 4.6 million aircraft parts
available to commercial airlines might fit their needs, he said.
"The benefit of this system is Boeing bears responsibility for
keeping parts stocked, managing the inventory and delivery," Dalton
said, in an Associated Press account. "All these services are built into
the catalog price, but the government doesn't have to do it on its own."
The "reinvented" purchasing program isn't just focused on obtaining
the best price for products, but on speed -- the faster a product is
obtained, the better. In fact, a government website dedicated to
"reinvention" information says the Clinton-Gore program attempts to
"emphasize productivity over accountability for following rules."
Some defense officials worry that too much emphasis on speed has
forced purchasing officers to shy away from comparing prices for fear it
might slow down orders.
"I think there's a real morale problem," said Robert Lieberman, the
Pentagon's assistant inspector general for auditing. "I think as a
practical matter, people are going to cut corners. They will be
criticized severely for slowing down."
A review of military records by the Associated Press found the faster
and less burdensome system is not always cheaper -- producing purchases
like a $76 screw.
Air Force Maj. Joe Besselman, who has studied the new purchasing
system, also noted officials paid exorbitant prices on smaller orders.
Using wholesale commercial prices as a guide, he found a 15-cent
O-ring gasket was purchased by the Defense Department for $30, a 40-cent
diode cost taxpayers $4.50 and a 60-cent transistor went for $7.60. He
also found that the same turbine blades bought for $19.80 cost $63.70
when not part of a high-volume purchase. And a jet engine part cost $251
in volume, but $768 when just 15 were bought.
Besselman's review did find success stories with commercial purchases
of electronic items, computer software and engines. He found the Defense
Department paid $99.9 million for 831,000 items for which private
companies would have paid $188.7 million at wholesale prices.
Recipients of the 'Hammer Award' are those who have made "significant |
But the inspector general, the agency internal watchdog, found
several examples of waste in purchases where defense officials were too
willing to accept a contractor's description of a product as
commercially available and did not demand cost figures. In those cases,
the Defense Department was either the sole or primary user of the item.
The inspector general's examples of inflated prices include:
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- $714 for an electrical bell worth just $47;
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- $251 for a compressor seal with a "fair and reasonable" price of
just $59;Â
- $350 for a ball bearing that should have cost $48;
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- $76 for a single screw that had been priced earlier at 57 cents;
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- $1,236 for fan assemblies worth $675.
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Such examples have led a watchdog group in Washington to
conclude the Clinton administration's reinventing government program
placed too much price-setting power in the hands of Pentagon
contractors.
"The defense industry succeeded beyond its wildest dreams," the
Project on Government Oversight concluded.
"Unfortunately, the defense industry took the wisdom of the Reinventing
Government campaign and pushed it much too far."
Administration officials dismiss the criticism, saying they have
reshaped a purchasing system that in the 1980s made headlines for buying
$435 hammers and $640 airplane toilets.
The critics have "tied our learning to do business smarter with
giving away the farm," said Stan Z. Soloway, a top Defense acquisition
official. "That's just nonsense."
Soloway said 30-day delivery times for items have been halved. Large
volume discounts are negotiated. And chocolate chip cookies are bought
in normal packages, eliminating silly military specifications that in
the past mandated that a cookie's "diameter at its greatest dimension
shall be not less than 2 5/16 inches."
Soloway, the deputy defense undersecretary for acquisition reform,
said such examples of inflated prices are part of "a learning process,
not a case of the government getting ripped off."
He said Defense Department purchasing officers have been "steeped in
a culture, they've been taught to do things based on a certain set of
rules, checklists and so forth and to essentially avoid really taking
innovative business approaches."
Steven Kelman, a professor of management at Harvard University and administrator of the government's Office of
Federal Procurement Policy from 1993-97, said the administration's
reinvention program is about replacing $14,000 Navy radios made
according to "military specs" with a $2,500 modified commercial version.
And it's about the ability to switch from military socks, made
according to exact requirements, to commercial brands.
"The old socks had no elastic on top," Kelman said. "So they fell
down."
Soloway claims he encourages innovation and hard bargaining. The top
concern of Pentagon contract negotiators, he said, is that congressional
and Defense auditors will "come down on them like a hammer" for making a
mistake, he said.
Ironically, a hammer is precisely the award given to government
employees who use innovative business tactics to reduce government
waste.
The "Hammer Award" is presented to people who have made "significant
contributions to reinventing government."
"REGO Magazine," a government webzine
sponsored by the National Partnership for Reinventing Government, explains the symbolism of the award: "Before Federal
Reinvention, government processes and red tape were so costly that
buying a $6.00 hammer cost the government about $400.00. A common-sense
reply to that hammer of yesteryear, the award consists of an ordinary $6
carpenter's hammer, a ribbon, and a handwritten note. The hammer also
symbolizes reinvention as the process of building a government that
works better, costs less, and gets results Americans care about."
Since 1993, more than 1,000 Hammer Awards, said to be the invention
of Al Gore, have been presented to federal, state and local employees,
and citizens.