I can’t help but be amused at President Barack Obama’s heralded plan to overhaul federal purchasing rules. Not that I don’t applaud attempts to cut governmental red tape. But this is the same issue that then-Vice President Al Gore was to have fixed the last time the Democrats ruled the White House.

Doesn’t anyone remember Gore smashing ashtrays on David Letterman to bring awareness to the need for federal acquisition reform? Or the fact that President Clinton already said he fixed this? I sure do.

I was fortunate enough to be present in the Rose Garden when Clinton signed the Federal Acquisition Streamlining Act into law back in 1994. It wasn’t a silver bullet, but it set forth a trend to bring commercial spend management and automation principles into antiquated and cumbersome federal rules. (Coincidentally, it was Clinton that appointed Professor Steve Kelman to head the Office of Federal Procurement Policy (OFPP) in the early 1990s. The now retired Kelman has since shepherded two additional federal procurement reform acts into law as well as numerous changes to the FAR.)

I also had the opportunity to do an examination into the procurement practices of hundreds of federal and state and local agencies. The key finding: government procurement is a victim of its own good intentions. Unlike private sector spend management initiatives, which focus on a continually need to reduce material and process costs, public sector procurement initiatives are primarily driven by requirements to comply with contracting regulations and mandates.

Sure, these rules were developed with good intentions, such as ensuring equal opportunity for minority, women-owned businesses (MWOB) to compete for and win government contracts. However, several generations of new and increasingly complex contracting regulations, policies, and rigid specifications stymied government procurement operations. In fact, most government agencies exhaust more effort working to satisfy these regulations than developing cost-effective and performance-driven supply relationships. Ironically, this labyrinth of procurement regulations also opens the door to costly and lengthy protests and the post-award scope creep that the Obama Administration is targeting.

Here are few recommendations for President Obama (not that he asked) as he embarks on his procurement reform plan:

• Put an experienced chief in charge. Behind every great spend management organization is a great leader. The President’s first step should be to tap an experienced CPO to lead the charge — and fast. Setting a grand agenda for procurement reform before hiring an experienced chief is a recipe for disaster. Having made procurement reform a priority (again), the Obama Administration should move quickly to hire a new chief, preferably somone who has been in the procurement trenches in industry. A few candidates come to mind: Chrysler CPO-turned-President Thomas Stallkamp or former Honda and John Deere CPO Dave Nelson are both great picks with successful track records. Former Delta CPO Aaron Dent or current Tyco CPO Shelley Stewart are also great picks as they have driven procurement transformation in the face of bankruptcy and re-regulation, respectively.
• Know what you’re dealing with: In his speech, President Obama stated, “In order for us to get a handle on these costs, it’s also important that we are honest in what these costs are.” That begins with better visibility into spending - and not just at the top-line budget level or with a focus on big-dollar projects or spend buckets. Instead, the government must gain line-item detail understanding of spending on everything from helicopters to laptops to black-car transportation services. A few years back, I aided the Government Accountability Office (GAO) - basically the government’s watchdog agency - in their assessment of Defense Department procurement practices. Their primary recommendation: DoD should improve and automate procedures to aggregating, classifying, and analyzing spending data. Improved spend visibility would allow the Feds to get a true understanding of the scope of its savings and compliance improvement opportunities.
• Use your leverage: Despite the General Services Administration’s (GSA) best attempts, federal agencies continue to miss massive opportunities to leverage spending and aggregate buying power for standard products and services.
• Control demand: With better visibility into spending and tighter alignment between agencies, the Feds can institute much-needed demand management plans to curb spending in the first place. Tactics that have worked well in the private sector include simplifying and standardizing specifications for both goods (PCs, laptops, printers) and services (shipping, transportation services, legal services); aggregating demand; and repurposing unused assets and inventory instead of buying new equipment.
• Improve contract management: The President’s biggest target seems to be the cost overruns on construction, IT, and other big-ticket projects “where we’re seeing cost overruns of 30 percent or 40 percent or 50 percent, and then still don’t perform the way they’re supposed to.” Obama said his team has “already identified $40 billion in savings” by imposing curbs on such overruns. The Administration could go a step further by improving its contracting approach to prohibit cost overruns or switch to performance-based contracting, which puts a portion of the vendor’s fees at risk of quality and on-time delivery. It should also improve visibility, reporting, and control of existing contracts through the use of more advanced and commercial contract management systems. Aberdeen Group research reports that private companies using such systems have been able to increase compliance by more than 55%, resulting in 15% - 20% reductions in purchase costs.

While I applaud the Obama Administration’s procurement reform efforts, the devil is in the details. Thankfully, the private sector has already written the book on spend management success. And, while the President wisely acknowledges that public sector procurement has its own politics, it would be wise to borrow from the pages of the private sector’s proven procurement practices. The country does not have the luxury to rewrite the book.