Witness Testimony of Mr. Charles Maurice Baker, MCB Lighting and Electrical, Owings, MD, President and Chief Executive Officer, Board of Directors, Veterans Enterprise Training and Services Gruop, Inc. (VETS , and Members Veterans Entrepreneurship Task Force (VET-Force)
Today, we have a unique opportunity like none other in history to actually create the most dynamic win/win proposition between the procurement community and our Service Disabled Veterans.
Our presentation is based on a theme of unity, teamwork and sharing of ideas. It is not our intent to criticize, point fingers or to assess blame. Rather we want to share information as well as introduce viable approaches for making economic opportunity readily available for Service Disabled Veterans and at the end of the day, we hope that the information provided is helpful and that you agree with us and our methods.
It is our vision to help educate as many people about procurement as possible by identifying and communicating better business practices and strategies which will help improve the procurement process, save money and greatly reduce fraud and abuse while at the same time achieving the true intent of procurement laws.
Our mission is to help Service Disable Veterans while at the same time save billions of dollars in procurement spending. We will reach out to contracting officers and agency management to identify areas of weaknesses and work as a team to fix them. We also will reach out to our Service Disabled Veterans to ensure they understand how to prosper under the procurement rules and how to work effectively with the procurement professionals.
Service Disabled Veterans
Today we have the youngest overall group of disabled veterans produced by war at anytime in our history. The effect of this will dramatically altered the lives of our soldiers and present several challenges for them to survive emotionally and economically in the future. Because this group is young, we need to come up with long-term solutions that fit their needs and the needs of our society.
We believe that this group of service disabled veterans is intelligent and innovative. We can help compensate them for any future lost earnings by making it possible for them to survive on their own through business opportunities or providing them with the appropriate skills to re-enter the workforce.
Helping this group succeed independently improves our tax base while at the same time saves significant money by reducing or eliminating any potential future burden on our social and medical support systems.
Department of Defense
The Department of Defense (DOD) provides the greatest economic opportunity for its fallen soldiers. DOD spent approximately 70% of the federal procurement dollars in Fiscal 2005. It should go without saying that DOD has the moral and ethical responsibility to create economic and moral justice for Service Disabled Veterans, even if the rest of the federal government fails to do so.
DOD can and should take the necessary steps to ensure that its fallen soldiers are invited to the table to participate.
We will discuss later DOD’s results in achieving its service disabled veterans goal.
Procurement Issues and Potential Fixes
The information that follows is either factual or our opinion and it is not intended to be inflammatory or adversarial.
Federal Procurement requires the enhancement of its procurement programs in order to make better management decisions affecting the mission of operating an efficient government in a cost effective manner.
We believe that the procurement system is broken and it is not being operated in an efficient and cost effective manner. A direct result of a broken procurement system is economic injustice.
First of all let’s address the lack of a trained procurement work force. With the baby boomers maturing and leaving federal procurement we are losing internal knowledge and expertise and there does not appear to be a smooth handoff of knowledge and information from those retiring to the new workforce. It appears at times that the new workforce is lost and doesn’t demonstrate that they have a clue when it comes to procurement laws and the federal acquisition regulations.
Along with the inexperienced procurement staff, another troubling area is the reduction over the years of the procurement workforce. According to Congressman Waxman it will take 1% of the total dollars spent on the procurement system to fix this problem.
Second, procurement is broken beyond adding trained procurement personnel. Bodies alone will not fix this problem totally. In order to fix procurement you must, and I mean must understand:
- Needs of the customer (current mistake);
- Customer’s mission (second mistake);
- Contracting rules totally; and
- The industry for each type of market segment you are contracting.
One way to augment the procurement knowledge base with true experience is with ex-government employees because of their understanding of how the procurement system works. From this base there can be a synergistic approach taken to address the issues and truly fix the procurement problem. It would be difficult to find this knowledge base at a big consulting company, but you can find this knowledge within the SDVOB community. There are those in the community who have the vision and truly understand the overall mission of government within the existing rules.
The third issue in procurement is the intent of the existing procurement laws associated with the implementation of the rules of procurement is not being followed. This is why we are having problems with federal procurement and are not meeting the small business goals. First of all if the rules were followed there would be a greater possibility of success in meeting the small business goals. SDVOBs, for example, would get closer to 3% if the rules were enforced to use the maximum practicable utilization.
Many want us to believe that procurement needs to be over hauled. That was the thinking before 1984 when the Competition in Contracting Act (CICA) and the Federal Acquisition Regulations (FAR) were created. In 1994, the Federal Acquisition Streamlined Procurement Act was supposed to overhaul contracting and it created a bigger mess with an increased utilization of GSA, DLA, and federal schedules, and now in 2007 everybody wants to fix contracting again.
This time we recommend approaching it differently. Rather than changing anything, how about following the existing rules and complying with the intent of the existing laws first. Be creative and innovative within the rules, in the best interest of the government and not in the best interests of personal gain. Somehow we let the people with the gold (money) and political influence change all the rules in their favor. This is why we don’t have competition in contracting and sole source contracts have increased 115% over the last 5 years to $145B.
Until Congressman Waxman is successful in implementing additional staffing through his 1% initiative, the procurement workforce needs to begin an intense training regimen, the laws and rules on the books today needs to be followed and enforced and we need to seek out more inclusion of the Service Disabled community for their experience and expertise.
Let’s address the issue of economic injustice.
There is no excuse for not meeting preference group’s goals. Veterans just like everybody else deserve both moral and economic justice.
Within federal procurement we need a farm system (similar to sports). This system will grow what the system needs to increase competition and provide enormous saving to the taxpayers later. How are we going to do this? Let’s look at history. For business development, the intent of the rules of procurement was to exclusively reserve all the procurements under $100K for small business (2 chapters FAR Part 13 & 19) yet we have a two sentence loophole which allows big business to circumvent and take the business utilizing FAR Part 8.404.
What is the problem when it comes to purchases over the micro purchase limit of $3K not to exceed $100K in my industry? The problem is big business everything, they take all but the scraps for the preference groups to share with one another. What are the scraps? It’s 98% of the transactions and 95% of the money to the tune of $2B? This is siphoned out of small business programs exclusively reserved for small business related to Maintenance Repair & Operations (MRO). The customer only goes to the agency procurement office when these DLA prime vendors try to rake them over the hot, hot coals or they refuse to respond in a timely manner and then it’s with a clinched fist. If DLA would perform without missing a beat the customer (my old office) would never go to contracting even though the customer is paying up to a 23% prime vendor surcharge (3.9 DLA surcharge) for its product or service. Are my numbers concrete? I am sharing with you what I experienced as a government employee who thought it was a waste of tax payer’s dollars, but we had no other method to accomplish the mission. Contracting was not a viable option or only our last resort for MRO materials if the contracting officers were too non-responsive. We would have to go without water, electricity etc. if we relied on the procurement system without deviation.
We are trying to counter this economic injustice.
Within our veterans group, we must empower the veteran community with the best methods to become a viable, sustainable, competitive company or close to 57% of SDVOBs will fail.
We need to empower the Veteran community with a fully funded Business Development program and a vehicle that helps them overcome the natural challenges associated with becoming a successful Prime Contractor and/or participating in material Sub-Contract opportunities.
One such vehicle would be the establishment of a Public/Private Partnership that includes our nation’s Colleges/Universities, Leading Prime Contractors, Business Trade Associations, and Trade Buying Groups. Specifically, the Colleges/Universities could expand their Graduate Course Curriculum by adding an out reach component that allows their students to deliver a comprehensive business analysis and planning engagement to the Veteran Businesses within their communities. This academic perspective could be supplemented by the real-world knowledge base that could be delivered to these engagements by the Prime Contractor’s SBLOs, in concert with their Trade Association Partners.
Utilizing some of the best minds in MBA programs coupled with the leveraged buying power associated with national small business buying groups and the purchasing power of the federal government is a very powerful combination.
What we have outlined above is a situation ready for “prime time” and will save the government billions of dollars. These groups could be galvanized into a BD support delivery system that leverages their Enterprise knowledge base against the holistic development needs of our Veteran business community. This collective knowledge base would empower the Veteran Community with the ability to formulate an ideal strategy for pursuing a business growth initiative that incorporates a healthy mix of Public Sector and Commercial Customers, irrespective of their entry approach (i.e. Prime Contractor, Sub-Contractor, Teaming Partner, JV Member…etc.).
As part of our journey to help Service Disabled Veterans we have to work closely with those in the other preference groups. We call in our united front.
I believe the SDVOB will create a rising tide. With that rising tide we should fight for enforcement and improvements to all small businesses programs with the theme of American flag wrapped around small business. Buried inside the SDVOB group, making up 58% of our number, is another preference group. Yet, even with this double, triple and quadruple preference the SDVOB achievement still falls far short of 3%.
This is indicative a sub-story of that is happening in federal procurement. There is infighting within the Designated Groups. We must not fight among the preference groups, causing a rear guard action within our own internal group and with other groups externally. These preference groups don't have the resources we need to get 3% of the contract dollars. Somehow, we must get the contract dollars, we all deserve according to the laws put in place to help us. In addition to the plan we outlined above for DOD, this is another methodology to get the 3% right away by using the existing laws to our favor while other laws are drafted.
So far we have been talking about problems and issues. I want to turn our attention to some ideas, solutions and opportunities.
How can we fix some of the procurement problems that we are facing today?
We can start by making good management decisions. One decision is considering shifting over a taxing workload to an innovative program that we have.
Over 90% of all procurement transactions are under the $100K threshold and represent only 10% of the total procurement dollars. A significant amount of time and effort is consumed by the procurement workforce processing small dollar transactions. We think this is wasting limited, valuable resources and time. These resources and the associated time can be better focused on the real money and the real acquisition issues.
The time involved in processing smaller transactions not only is burdensome to the acquisition workforce but it’s equally time consuming and a nightmare for customers also. I speak with 20 years of frustration of dealing with federal procurement and trying to accomplish the mission as a government employee. As the ex-chief of facilities for Andrews AFB I can tell you horror stories of having HVAC units broken for weeks and sometimes months for a $5K part my people went and put their hands on but could not fix the units for several months because of the slow procurement process. After all was said and done the procurement rules in the name of competition cost the tax payers enormously as the administrative cost would some times even exceed the cost of the parts. In addition, the cost of a temporary solution would some times triple the purchase cost of the item ordered.
We have created a logical plan for DOD to use immediately to assist it in reaching its 3% goal.
Currently DOD spending with SDVOB companies is at 0.49% with a goal of 3.0%. In its second year strategic plan, DOD is committed to meeting its statutory 3.0 target. Unfortunately DOD does not elaborate on the specifics of achieving the goal. Our experience is that this goal is similar to the analogy of “covering the waterfront” which past history has demonstrated does not work for the federal government because other preference goals have never been met because they never had a logical analytical plan to follow. There has to be a strategy with meaningful targets set with milestones and timelines attached.
Our plan creates an implementation strategy based on the historical data of SDVOB procurements with DOD from the most current Fiscal Year 2005 data in the Federal Procurement Data System-NG.
Our plan is a goal attainment strategy based on actual data which clearly demonstrates the immediate possibility of delivering 3% using a simple logical thought process using product or service categories where SDVOB companies have the most potential for success. The process identifies product or service categories for all DOD procurement requirements. DOD can use this process to specifically target product and service categories where there is little or no participation currently for SDVOB companies. Our plan is very effective for program managers and contracting officers. Each product or service code is assigned a percentage target for SDVOB participation. The percentage target is based on dollar volume spending in Fiscal Year 2005. There is a tiered percentage scale that is used. The scale is dollar volume driven with the percentage declining the higher the spending. The percentage scale is as follows:
- Up to$100 million – 6%
- Up to $500 million – 5%
- Up to $1 billion – 4%
- Up to $10 billion – 3%
- Over $10 billion – 2.5%
Our vision is to have DOD implement our plan immediately so that it can contribute to helping SDVOB companies become sustainable, competitive and viable businesses as well as satisfy its goal of 3%.
Our plan was created by MCB Lighting & Electrical of Owings, MD POC Charles Baker 301-812-2591 and Mazyck and Associates of Sacramento, CA POC Edward V. Mazyck, Jr. 650-465-6403. MCB INC. at the request of CEO Charles M Baker worked with Mazyck & Associates to develop this goal attainment strategy.
One final note. Our plan is applicable to all Departments and we will work with all Departments to help them realize their goals as well.
Thank you for the opportunity to share some of our thoughts with you today and we hope that it has been informative, educational and helpful.